TSC Ratings' Updates: Cypress

We've downgraded American Ecology(ECOL Quote), which provides radioactive, hazardous, polychlorinated biphenyls and industrial waste management services in the U.S., from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. 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.

Revenue rose slightly by 4.1% since the same quarter a year ago, but EPS declined. The company's debt-to-equity ratio of 0 is very low and is currently below that of the industry average, implying very successful management of debt levels. The company also maintains a quick ratio of 2.68, which clearly demonstrates the ability to cover short-term cash needs. American Ecology's return on equity has improved slightly when compared with the same quarter one year prior, which can be construed as a modest strength in the organization, outperforming the S&P 500 but underperforming the industry average.

Net operating cash flow has decreased to $6.52 million, or 38.93% when compared with the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. Shares are down 22%, reflecting the market's decline and the decline in the company's EPS. We do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months, and despite the past decline, the stock is still selling for more than most others in its industry.