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

)

-- Eastern

(Nasdaq:

EML

) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:

  • EML's revenue growth has slightly outpaced the industry average of 6.2%. Since the same quarter one year prior, revenues slightly increased by 3.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • EML's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.85, which clearly demonstrates the ability to cover short-term cash needs.
  • EASTERN CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, EASTERN CO reported lower earnings of $1.11 versus $1.39 in the prior year.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Machinery industry and the overall market, EASTERN CO's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $0.41 million or 41.50% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

The Eastern Company manufactures and sells industrial hardware, security products, and metal products in the United States and internationally. Eastern has a market cap of $98.3 million and is part of the industrial goods sector and industrial industry. Shares are down 0.8% year to date as of the close of trading on Wednesday.

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Eastern Ratings Report

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