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 (
-- GSI Group
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and unimpressive growth in net income.
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Highlights from the ratings report include:
- GSIG's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GSIG has a quick ratio of 1.97, which demonstrates the ability of the company to cover short-term liquidity needs.
- 47.50% is the gross profit margin for GSI GROUP INC which we consider to be strong. Regardless of GSIG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GSIG's net profit margin of 6.90% compares favorably to the industry average.
- GSI GROUP INC's earnings per share declined by 38.1% 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, GSI GROUP INC increased its bottom line by earning $0.72 versus $0.01 in the prior year.
- The share price of GSI GROUP INC has not done very well: it is down 5.55% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- Net operating cash flow has decreased to $9.76 million or 20.49% 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.
GSI Group Inc. designs, develops, manufactures, and sells laser-based solutions, laser scanning devices, and precision motion and optical control technologies worldwide. The company has a P/E ratio of 13.2, below the average electronics industry P/E ratio of 16.1 and below the S&P 500 P/E ratio of 17.7. GSI Group has a market cap of $298.9 million and is part of the
industry. Shares are down 13.3% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet Ratings Staff
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