NEW YORK ( TheStreet) -- Wesco Financial Corporation (AMEX: WSC) 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, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- 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 Insurance industry. The net income has significantly decreased by 533.9% when compared to the same quarter one year ago, falling from $12.33 million to -$53.48 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, WESCO FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Net operating cash flow has increased to $22.97 million or 21.20% when compared to the same quarter last year. In addition, WESCO FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of -100.00%.
- Although WSC's debt-to-equity ratio of 0.02 is very low, it is currently higher than that of the industry average.