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, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.
Highlights from the ratings report include:
- The revenue growth significantly trails the industry average of 45.4%. Since the same quarter one year prior, revenues slightly increased by 6.8%. 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Electronic Equipment, Instruments & Components industry and the overall market, KEMET CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- KEMET CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KEMET CORP turned its bottom line around by earning $0.86 versus -$2.58 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $0.86).
- The gross profit margin for KEMET CORP is currently lower than what is desirable, coming in at 27.90%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 5.40% is above that of the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 59.0% when compared to the same quarter one year ago, falling from $34.91 million to $14.32 million.
KEMET Corporation, together with its subsidiaries, manufactures and sells capacitors worldwide. Its products include tantalum, multilayer ceramic, film, electrolytic, paper, and solid aluminum capacitors. The company has a P/E ratio of 3.9, equal to the average electronics industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Kemet has a market cap of $312.4 million and is part of the
industry. Shares are down 53.8% year to date as of the close of trading on Monday.
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