NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, poor profit margins and feeble growth in the company's earnings per share.
Highlights from the ratings report include:
- ACET's revenue growth has slightly outpaced the industry average of 15.3%. Since the same quarter one year prior, revenues rose by 18.6%. 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.
- The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.38, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for ACETO CORP is rather low; currently it is at 18.10%. Regardless of ACET'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 3.30% trails the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ACET has underperformed the S&P 500 Index, declining 17.36% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
Aceto Corporation, together with its subsidiaries, engages in sourcing, quality assurance, regulatory support, marketing, and distributing chemically derived pharmaceuticals, biopharmaceuticals, specialty chemicals, and crop protection products. The company has a P/E ratio of 15.5, below the average chemicals industry P/E ratio of 15.9 and below the S&P 500 P/E ratio of 17.7. Aceto has a market cap of $157.1 million and is part of the
industry. Shares are down 41.8% year to date as of the close of trading on Tuesday.
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