TSC Ratings' Updates: Cypress

EPS declined steeply in the most recent quarter compared with the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, Navigators increased its bottom line by earning $5.63 vs. $4.32 in the prior year. For the next year, the market is expecting a contraction of 23.6% in earnings to $4.30.

Shares are down 14.7% on the year, reflecting the market's overall decline (which was actually deeper) and the company's decline in EPS. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

We've downgraded Tennant(TNC Quote), which designs, manufactures, and markets cleaning solutions, from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Revenue rose by 15.3% since the same quarter last year, outpacing the industry average of 13.8% growth and boosting EPS. The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying successful management of debt levels. Tennant also has a quick ratio of 1.64, which demonstrates the ability of the company to cover short-term liquidity needs. Its return on equity has improved slightly when compared to the same quarter one year prior, which can be construed as a modest strength in the organization. On the basis of return on equity, Tennant has underperformed the machinery industry but outperformed the S&P 500.