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) -- TransAlta (NYSE: TAC) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk.
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- The revenue growth came in higher than the industry average of 24.1%. Since the same quarter one year prior, revenues rose by 43.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income increased by 3000.0% when compared to the same quarter one year prior, rising from -$2.00 million to $58.00 million.
- The gross profit margin for TRANSALTA CORP is rather high; currently it is at 55.87%. Regardless of TAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAC's net profit margin of 7.48% compares favorably to the industry average.
- TAC has underperformed the S&P 500 Index, declining 10.57% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Even though the current debt-to-equity ratio is 1.48, it is still below the industry average, suggesting that this level of debt is acceptable within the Independent Power Producers & Energy Traders industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.34 is very low and demonstrates very weak liquidity.