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, 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 weak operating cash flow and a generally disappointing performance in the stock itself.
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Highlights from the ratings report include:
- ZEP's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ZEP INC has improved earnings per share by 39.3% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ZEP INC increased its bottom line by earning $0.78 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($1.01 versus $0.78).
- 48.30% is the gross profit margin for ZEP INC which we consider to be strong. Regardless of ZEP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.90% trails the industry average.
- ZEP has underperformed the S&P 500 Index, declining 9.39% from its price level of one year ago. 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.
- Net operating cash flow has declined marginally to $13.33 million or 8.72% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ZEP INC has marginally lower results.
Zep Inc. produces and markets cleaning and maintenance chemicals, and related products and services for commercial, industrial, institutional and consumer applications. The company has a P/E ratio of 17.4, equal to the average consumer non-durables industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Zep has a market cap of $324.5 million and is part of the
industry. Shares are up 3.6% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff