NEW YORK (TheStreet) -- WSI Industries (Nasdaq:WSCI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 138.6% when compared to the same quarter one year prior, rising from $0.04 million to $0.11 million.
- WSCI's revenue growth trails the industry average of 27.8%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The gross profit margin for WSI INDUSTRIES INC is rather low; currently it is at 21.00%. Regardless of WSCI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.80% trails the industry average.
- Net operating cash flow has decreased to $0.52 million or 18.88% when compared to the same quarter last year. Despite a decrease in cash flow of 18.88%, WSI INDUSTRIES INC is in line with the industry average cash flow growth rate of -28.18%.
-- Written by a member of TheStreet Ratings Staff
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