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) -- China Nepstar Chain Drugstore (NYSE: NPD) 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, 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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- The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 10.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- NPD 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.24, which illustrates the ability to avoid short-term cash problems.
- This stock has managed to rise its share value by 41.97% over the past twelve months. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- 42.40% is the gross profit margin for CHINA NEPSTAR CHAIN DRUG-ADS which we consider to be strong. Regardless of NPD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.67% trails the industry average.
- CHINA NEPSTAR CHAIN DRUG-ADS has shown no change in earnings for its most recently reported quarter when compared with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CHINA NEPSTAR CHAIN DRUG-ADS increased its bottom line by earning $0.14 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 73.6% in earnings ($0.04 versus $0.14).