TSC Ratings' Updates: Ingram Micro

The following ratings' changes were generated on October 3.

Ingram Micro(IM Quote) has been downgraded from buy to hold. Ingram Micro, Inc. and its subsidiaries distribute information technology (IT) products and supply chain solutions worldwide. The company offers various IT products, including peripherals, systems, software, networking and others. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a decline in the stock price during the past year, weak operating cash flow and poor profit margins.

IM's revenue growth trails the industry average of 20.9%. Since the same quarter one year prior, revenue has slightly increased by 7.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

IM's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.

Net operating cash flow has decreased to $275.62 million or 17.90% when compared with the same quarter last year. Despite a decrease in cash flow of 17.90%, IM is in line with the industry average cash flow growth rate of -18.71%.

IM is off 23.55% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared with the year-earlier quarter. 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.