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) -- MGC Diagnostics (Nasdaq: MGCD) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • MGC DIAGNOSTICS CORP has improved earnings per share by 16.7% 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, MGC DIAGNOSTICS CORP turned its bottom line around by earning $0.32 versus -$0.28 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.32).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Health Care Equipment & Supplies industry average, but is less than that of the S&P 500. The net income increased by 22.2% when compared to the same quarter one year prior, going from $0.25 million to $0.31 million.
  • MGCD 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. To add to this, MGCD has a quick ratio of 2.33, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for MGC DIAGNOSTICS CORP is rather high; currently it is at 57.25%. 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 4.14% trails the industry average.

MGC Diagnostics Corporation designs and markets non-invasive cardiorespiratory diagnostic products under the MGC Diagnostics and MedGraphics brand and trade names in the United States and internationally. MGC has a market cap of $37.9 million and is part of the health care sector and health services industry. Shares are down 30% year to date as of the close of trading on Monday.

You can view the full MGC Ratings Report or get investment ideas from our investment research center.

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