NEW YORK (
-- Twin Disc
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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Highlights from the ratings report include:
- TWIN's revenue growth has slightly outpaced the industry average of 16.7%. Since the same quarter one year prior, revenues rose by 24.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TWIN's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.16, which illustrates the ability to avoid short-term cash problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, TWIN DISC INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 37.40% is the gross profit margin for TWIN DISC INC which we consider to be strong. Regardless of TWIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TWIN's net profit margin of 9.80% compares favorably to the industry average.
- TWIN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 47.97%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
Twin Disc, Incorporated engages in the design, manufacture, and sale of marine and heavy duty off-highway power transmission equipment. The company has a P/E ratio of 6.1, equal to the average industrial industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Twin Disc has a market cap of $195.2 million and is part of the
industry. Shares are down 53% year to date as of the close of trading on Tuesday.
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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.