Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK (TheStreet) -- Orion Energy Systems (AMEX:OESX) has been upgraded by TheStreet Ratings from sell 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.
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- The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 36.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- OESX's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, OESX has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- ORION ENERGY SYSTEMS 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, ORION ENERGY SYSTEMS INC swung to a loss, reporting -$0.49 versus $0.02 in the prior year. This year, the market expects an improvement in earnings ($0.01 versus -$0.49).
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, ORION ENERGY SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ORION ENERGY SYSTEMS INC is currently lower than what is desirable, coming in at 32.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.74% is significantly below that of the industry average.
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