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Will This Downgrade Hurt FEI Company (FEIC) Today?

NEW YORK (TheStreet) -- FEI Company (FEIC) has been downgraded to "neutral" from "buy" with an $105 price target, D.A. Davidson said Monday. The firm said the ratings revision was a valuation call.

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Separately, TheStreet Ratings team rates FEI CO as a Buy with a ratings score of A. The team has this to say about their recommendation:

"We rate FEI CO (FEIC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, growth in earnings per share, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.7%. Since the same quarter one year prior, revenues rose by 14.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FEIC 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 2.58, which clearly demonstrates the ability to cover short-term cash needs.
  • FEI CO has improved earnings per share by 34.7% 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. During the past fiscal year, FEI CO increased its bottom line by earning $3.01 versus $2.80 in the prior year. This year, the market expects an improvement in earnings ($3.59 versus $3.01).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electronic Equipment, Instruments & Components industry average. The net income increased by 38.5% when compared to the same quarter one year prior, rising from $29.80 million to $41.27 million.
  • Net operating cash flow has significantly increased by 63.83% to $97.70 million when compared to the same quarter last year. In addition, FEI CO has also vastly surpassed the industry average cash flow growth rate of -7.83%.

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