NEW YORK ( TheStreet) -- Steinway Musical Instruments (NYSE: LVB) 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, 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 unimpressive growth in net income, poor profit margins and weak operating cash flow.

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 Leisure Equipment & Products industry. The net income has significantly decreased by 71.9% when compared to the same quarter one year ago, falling from $1.80 million to $0.51 million.
  • Net operating cash flow has significantly decreased to -$10.33 million or 3425.25% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Compared to its closing price of one year ago, LVB's share price has jumped by 38.96%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.9%. Since the same quarter one year prior, revenues slightly increased by 6.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

Steinway Musical Instruments, Inc. designs, manufactures, markets, and distributes musical instruments in the United States and internationally. The company operates through two segments: Pianos, and Band & Orchestral Instruments. The company has a P/E ratio of 36.6, equal to the average consumer durables industry P/E ratio and above the S&P 500 P/E ratio of 16.2. Steinway Musical Instruments has a market cap of $288.1 million and is part of the consumer goods sector and consumer durables industry. Shares are up 25.7% year to date as of the previous trading day's close.

You can view the full Steinway Musical Instruments Ratings Report or get investment ideas from our investment research center.
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