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) -- Perceptron (Nasdaq: PRCP) 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, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- PRCP 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 3.58, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, PRCP's share price has jumped by 96.47%, exceeding the performance of the broader market during that same time frame. 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.
- PRCP, with its decline in revenue, underperformed when compared the industry average of 4.8%. Since the same quarter one year prior, revenues slightly dropped by 5.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 39.75% is the gross profit margin for PERCEPTRON INC which we consider to be strong. Regardless of PRCP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PRCP's net profit margin of -3.25% significantly underperformed when compared to the industry average.
- 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. When compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, PERCEPTRON INC's return on equity is below that of both the industry average and the S&P 500.