NEW YORK ( TheStreet) -- CPI Aerostructures (AMEX: CVU) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its 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 deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Aerospace & Defense industry and the overall market, CPI AEROSTRUCTURES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Aerospace & Defense industry. The net income has significantly decreased by 290.1% when compared to the same quarter one year ago, falling from $1.56 million to -$2.97 million.
- Compared to its closing price of one year ago, CVU's share price has jumped by 117.52%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The revenue fell significantly faster than the industry average of 1.0%. Since the same quarter one year prior, revenues fell by 41.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CVU's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that CVU's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.