Sterling Construction Co Inc Stock Upgraded (STRL)

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) -- Sterling Construction (Nasdaq: STRL) has been upgraded by TheStreet Ratings from sell to hold. 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins.

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Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 12.2%. Since the same quarter one year prior, revenues rose by 46.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • STRL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
  • STERLING CONSTRUCTION CO 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, STERLING CONSTRUCTION CO INC reported poor results of -$4.90 versus -$0.27 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus -$4.90).
  • STRL has underperformed the S&P 500 Index, declining 9.15% 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.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Construction & Engineering industry and the overall market, STERLING CONSTRUCTION CO INC's return on equity significantly trails that of both the industry average and the S&P 500.

Sterling Construction Company, Inc. operates as a heavy civil construction company in Texas, Utah, Nevada, Arizona, California, Hawaii, and other states of the United States. Sterling Construction has a market cap of $170 million and is part of the industrial goods sector and materials & construction industry. Shares are down 22.9% year to date as of the close of trading on Wednesday.

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

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

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