NEW YORK ( TheStreet) -- HHGregg Incorporated (NYSE: HGG) 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, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, poor profit margins and disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for HHGREGG INC is currently lower than what is desirable, coming in at 29.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.10% trails that of the industry average.
- HGG'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 46.95%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, HGG is still more expensive than most of the other companies in its industry.
- Although HGG's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The revenue growth greatly exceeded the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 30.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.