NEW YORK (
) has been upgraded by TheStreet Ratings from hold to buy. 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, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, METHODE ELECTRONICS INC's return on equity is below that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- METHODE ELECTRONICS INC's earnings per share declined by 45.5% in the most recent quarter compared to 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, METHODE ELECTRONICS INC increased its bottom line by earning $0.50 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus $0.50).
- MEI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, MEI has a quick ratio of 2.31, which demonstrates the ability of the company to cover short-term liquidity needs.
- The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 23.5%. 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.
Methode Electronics, Inc. designs and manufactures electro-mechanical devices worldwide. It operates in four segments: Automotive, Interconnect, Power Products, and Other. The company has a P/E ratio of 21.7, above the average electronics industry P/E ratio of 20.9 and above the S&P 500 P/E ratio of 17.7. Methode has a market cap of $402.1 million and is part of the
industry. Shares are down 13.6% year to date as of the close of trading on Monday.
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