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) -- Coca-Cola Femsa SAB de CV (NYSE: KOF) 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 and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- KOF's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.77 is somewhat weak and could be cause for future problems.
- COCA-COLA FEMSA SAB DE CV's earnings per share declined by 12.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, COCA-COLA FEMSA SAB DE CV reported lower earnings of $4.28 versus $5.11 in the prior year. This year, the market expects an improvement in earnings ($4.71 versus $4.28).
- The gross profit margin for COCA-COLA FEMSA SAB DE CV is rather high; currently it is at 50.32%. Regardless of KOF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KOF's net profit margin of 5.96% is significantly lower than the industry average.
- Looking at the price performance of KOF's shares over the past 12 months, there is not much good news to report: the stock is down 25.04%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago and the fact that KOF is still more expensive than most of the other companies in its industry based on its current price-to-earnings ratio, we believe that other strengths that the company offers support our buy rating.