NEW YORK ( TheStreet) -- Escalade (Nasdaq: ESCA) 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, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- Net operating cash flow has significantly decreased to $1.86 million or 72.64% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The gross profit margin for ESCALADE INC is currently lower than what is desirable, coming in at 26.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.10% trails that of the industry average.
- ESCA's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
- Powered by its strong earnings growth of 112.50% and other important driving factors, this stock has surged by 110.83% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although ESCA had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- ESCA's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 7.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.