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) -- Denny's Corporation (Nasdaq: DENN) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, DENNYS CORP's return on equity significantly exceeds that of both the industry average and 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.
- DENNYS CORP's earnings per share declined by 28.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DENNYS CORP increased its bottom line by earning $0.27 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.27).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.1%. Since the same quarter one year prior, revenues slightly dropped by 1.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The debt-to-equity ratio is very high at 20.53 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.27, which clearly demonstrates the inability to cover short-term cash needs.