Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Impax Laboratories (Nasdaq: IPXL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, notable return on equity, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- IPXL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.45, which clearly demonstrates the ability to cover short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Pharmaceuticals industry and the overall market on the basis of return on equity, IMPAX LABORATORIES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- IMPAX LABORATORIES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, IMPAX LABORATORIES INC reported lower earnings of $0.81 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.81).