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Lifeway Foods Inc. Stock Downgraded (LWAY)

Editor's Note: 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.

NEW YORK ( TheStreet) -- Lifeway Foods (Nasdaq: LWAY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth 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.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 12.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LWAY's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, LWAY has a quick ratio of 1.67, which demonstrates the ability of the company to cover short-term liquidity needs.
  • LIFEWAY FOODS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LIFEWAY FOODS INC reported lower earnings of $0.18 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus $0.18).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Food Products industry and the overall market, LIFEWAY FOODS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • LWAY has underperformed the S&P 500 Index, declining 14.19% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
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Lifeway Foods, Inc., together with its subsidiaries, engages in the production and sale of probiotic, cultured, and functional dairy and non-dairy health food products in the United States. The company has a P/E ratio of 35.5, above the S&P 500 P/E ratio of 17.7. Lifeway has a market cap of $133.8 million and is part of the consumer goods sector and food & beverage industry. Shares are down 15.2% year to date as of the close of trading on Monday.

You can view the full Lifeway Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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