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) -- Masco Corporation (NYSE:MAS) 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, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.
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- MAS's revenue growth has slightly outpaced the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 10.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MASCO CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MASCO CORP continued to lose money by earning -$0.20 versus -$1.34 in the prior year. This year, the market expects an improvement in earnings ($0.76 versus -$0.20).
- The gross profit margin for MASCO CORP is currently lower than what is desirable, coming in at 30.48%. Regardless of MAS'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 3.58% trails the industry average.
- The debt-to-equity ratio is very high at 10.19 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, MAS's quick ratio is somewhat strong at 1.21, demonstrating the ability to handle short-term liquidity needs.
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