NEW YORK (
-- EMCOR Group
) 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 growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.
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Highlights from the ratings report include:
- EME's revenue growth has slightly outpaced the industry average of 14.7%. Since the same quarter one year prior, revenues rose by 21.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- EME's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.31, which illustrates the ability to avoid short-term cash problems.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Construction & Engineering industry average. The net income increased by 10.4% when compared to the same quarter one year prior, going from $24.59 million to $27.15 million.
- The gross profit margin for EMCOR GROUP INC is currently extremely low, coming in at 12.70%. Regardless of EME'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 1.80% trails the industry average.
- EME has underperformed the S&P 500 Index, declining 8.42% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
EMCOR Group, Inc., together with its subsidiaries, provides electrical and mechanical construction, and facilities services to commercial, industrial, utility, and institutional customers in the United States, the United Kingdom, and internationally. The company has a P/E ratio of 14.3, above the average materials & construction industry P/E ratio of 13.4 and below the S&P 500 P/E ratio of 17.7. EMCOR Group has a market cap of $1.75 billion and is part of the
industry. Shares are down 2.1% year to date as of the close of trading on Monday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.