Granite Construction Inc. Stock Upgraded (GVA)

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) -- Granite Construction (NYSE: GVA) 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, increase in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 13.3%. Since the same quarter one year prior, revenues slightly increased by 6.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Construction & Engineering industry. The net income increased by 861.2% when compared to the same quarter one year prior, rising from $1.42 million to $13.64 million.
  • GRANITE CONSTRUCTION INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GRANITE CONSTRUCTION INC swung to a loss, reporting -$0.94 versus $1.14 in the prior year. This year, the market expects an improvement in earnings ($1.47 versus -$0.94).
  • In its most recent trading session, GVA has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

Granite Construction Incorporated operates as a heavy civil contractor and a construction materials producer in the United States. The company operates in four segments: Construction, Large Project Construction, Construction Materials, and Real Estate. Granite Construction has a market cap of $1.28 billion and is part of the industrial goods sector and materials & construction industry. Shares are down 5.9% year to date as of the close of trading on Tuesday.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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