What happened

Shares of R.R. Donnelley & Sons (NYSE:RRD) jumped on Tuesday after the provider of business services and marketing solutions received an analyst upgrade. The stock was up about 8.1% at 12:35 p.m. EDT after being up as much as 16% earlier in the day.

So what

Analysts at Buckingham upgraded shares of RRD to "buy" on Tuesday morning, up from a previous "neutral" rating. This upgrade comes about a month after the company reported a mixed second-quarter report.

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RRD reported second-quarter revenue growth of 3.7%, driven by organic sales growth of 2.7%, but it posted a bigger-than-expected net loss. The company also cut its guidance for the full year, trimming both its revenue and adjusted earnings outlook. The sale of its print logistics business was the main driver behind the guidance cut.

The upgrade may be a valuation call, given the brutal decline suffered by the stock over the past few years. Shares of RRD are down about 84% from their five-year high, and now trade for around five times the company's adjusted earnings guidance.

Now what

While RRD has now reported three consecutive quarters of organic sales growth, margins remain tight. Gross margin was just 17.3% in the first half of the year, down nearly 2 percentage points from the prior-year period. Sales growth at the expense of margins isn't particularly good news. The company also slashed its quarterly dividend to $0.03 per share, down from a previous payment of $0.14 per share.

Still, the stock is extremely cheap based on adjusted earnings guidance, so it could see big gains if the company can truly turn itself around.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.