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) -- ArthroCare Corporation (Nasdaq:ARTC) 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 good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.
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- ARTC's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 0.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- ARTC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.84, which clearly demonstrates the ability to cover short-term cash needs.
- ARTHROCARE CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ARTHROCARE CORP turned its bottom line around by earning $1.27 versus -$0.37 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $1.27).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Health Care Equipment & Supplies industry and the overall market, ARTHROCARE CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 155.3% when compared to the same quarter one year ago, falling from $12.26 million to -$6.78 million.
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