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) -- Silicon Image (Nasdaq: SIMG) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- SILICON IMAGE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SILICON IMAGE INC turned its bottom line around by earning $0.14 versus -$0.13 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.14).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 85.9% when compared to the same quarter one year prior, rising from -$0.70 million to -$0.10 million.
- SIMG 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 4.15, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SILICON IMAGE INC is rather high; currently it is at 62.61%. 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 -0.16% is in-line with the industry average.
- Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 25.25% 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.