NEW YORK (TheStreet) -- Rocky Brands (Nasdaq:RCKY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, 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 generally disappointing performance in the stock itself and weak operating cash flow. Highlights from the ratings report include:
- ROCKY BRANDS INC has improved earnings per share by 11.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ROCKY BRANDS INC increased its bottom line by earning $1.02 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $1.02).
- Despite currently having a low debt-to-equity ratio of 0.53, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.13 is very high and demonstrates very strong liquidity.
- Net operating cash flow has decreased to -$18.71 million or 28.37% when compared to the same quarter last year. Despite a decrease in cash flow ROCKY BRANDS INC is still fairing well by exceeding its industry average cash flow growth rate of -61.14%.
- In its most recent trading session, RCKY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
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