NEW YORK (
) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.
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Highlights from the ratings report include:
- SEH's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SPARTECH CORP has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SPARTECH CORP continued to lose money by earning -$0.76 versus -$1.62 in the prior year. This year, the market expects an improvement in earnings ($0.25 versus -$0.76).
- SEH's debt-to-equity ratio of 0.90 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.77 is weak.
- The gross profit margin for SPARTECH CORP is currently extremely low, coming in at 12.60%. Regardless of SEH'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 1.20% trails the industry average.
- SEH has underperformed the S&P 500 Index, declining 6.92% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
Spartech Corporation, together with its subsidiaries, operates as an intermediary processor of engineered thermoplastics, polymeric compounds, and concentrates. The company operates in three segments: Custom Sheet and Rollstock, Packaging Technologies, and Color and Specialty Compounds. Spartech has a market cap of $167.5 million and is part of the
industry. Shares are up 15% year to date as of the close of trading on Thursday.
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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.