L.S. Starrett Company Stock Upgraded (SCX)

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) -- L.S. Starrett Company (NYSE: SCX) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 19.0%. Since the same quarter one year prior, revenues slightly increased by 3.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SCX's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.61, which clearly demonstrates the ability to cover short-term cash needs.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 274.4% when compared to the same quarter one year prior, rising from $0.48 million to $1.78 million.
  • 36.68% is the gross profit margin for STARRETT (L.S.) CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 2.88% trails the industry average.
  • Powered by its strong earnings growth of 271.42% and other important driving factors, this stock has surged by 48.14% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

The L.S. Starrett Company manufactures and sells industrial, professional, and consumer measuring and cutting tools and related products primarily in North America, Brazil, China, and the United Kingdom. The company has a P/E ratio of 64, above the S&P 500 P/E ratio of 17.7. L.S. Starrett has a market cap of $98 million and is part of the industrial goods sector and industrial industry. Shares are up 11.1% year to date as of the close of trading on Tuesday.

You can view the full L.S. Starrett Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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