Kronos Worldwide Inc Stock Upgraded (KRO)

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) -- Kronos Worldwide (NYSE: KRO) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, increase in stock price during the past year and notable return on equity. 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:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 197.6% when compared to the same quarter one year prior, rising from -$33.90 million to $33.10 million.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, KRO has a quick ratio of 2.12, which demonstrates the ability of the company to cover short-term liquidity needs.
  • KRONOS WORLDWIDE 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, KRONOS WORLDWIDE INC swung to a loss, reporting -$0.87 versus $1.88 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus -$0.87).
  • KRO, with its decline in revenue, underperformed when compared the industry average of 7.6%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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