Editor's Note: 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
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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and feeble growth in the company's earnings per share.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 13.7%. 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.
- UFPI's debt-to-equity ratio is very low at 0.09 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 1.14, which illustrates the ability to avoid short-term cash problems.
- 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 Building Products industry and the overall market, UNIVERSAL FOREST PRODS INC's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The gross profit margin for UNIVERSAL FOREST PRODS INC is currently extremely low, coming in at 11.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.80% trails that of the industry average.
- Net operating cash flow has significantly decreased to $23.32 million or 61.15% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
Universal Forest Products, Inc., through its subsidiaries, designs, manufactures, and markets wood and wood-alternative products, and other building products for retail building home centers and other retailers, manufactured housing, and industrial markets. The company has a P/E ratio of 30.7, above the average materials & construction industry P/E ratio of 29 and above the S&P 500 P/E ratio of 17.7. Universal Forest has a market cap of $738.1 million and is part of the industrial goods sector and materials & construction industry. Shares are up 18.1% year to date as of the close of trading on Monday.
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-- Written by a member of TheStreet Ratings Staff
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