Editor's Note: 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
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 revenue growth, increase in net income and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 21.6%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 40.0% when compared to the same quarter one year prior, rising from -$1.00 million to -$0.60 million.
- Compared to its closing price of one year ago, FSS's share price has jumped by 59.08%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The gross profit margin for FEDERAL SIGNAL CORP is currently lower than what is desirable, coming in at 25.10%. Regardless of FSS'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 -0.30% trails the industry average.
- Net operating cash flow has significantly decreased to -$14.90 million or 551.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
Federal Signal Corporation designs, manufactures, and sells a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers primarily in the United States, Europe, and Canada. Federal has a market cap of $503.6 million and is part of the consumer goods sector and automotive industry. Shares are up 4.9% year to date as of the close of trading on Tuesday.
You can view the full
or get investment ideas from our
-- Written by a member of TheStreet Ratings Staff
Exclusive Offer: Jim Cramer's 'go-to' small/mid-cap guru Bryan Ashenberg only buys stocks he thinks could return 50-100% See his top picks for 14-days FREE