NEW YORK (TheStreet) -- Tesco Corporation (Nasdaq:TESO) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 14.3%. Since the same quarter one year prior, revenues rose by 44.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TESO's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.39, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for TESCO CORP is currently lower than what is desirable, coming in at 28.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 9.50% trails that of the industry average.
- Net operating cash flow has decreased to -$8.00 million or 32.63% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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