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, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 22.4%. 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 gross profit margin for NEWPORT CORP is rather high; currently it is at 50.20%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.20% trails the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.59%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 67.92% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 68.2% when compared to the same quarter one year ago, falling from $20.76 million to $6.59 million.
Newport Corporation and its subsidiaries provide technology products and systems to scientific research, microelectronics, aerospace and defense/security, life and health sciences, and industrial markets in the United States, Europe, and the Pacific Rim. The company has a P/E ratio of seven, equal to the average electronics industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Newport has a market cap of $449.7 million and is part of the
industry. Shares are down 12.6% 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.