NEW YORK ( TheStreet) -- PetMed Express (Nasdaq: PETS) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income 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 against the S&P 500 and did not exceed that of the Internet & Catalog Retail industry. The net income has significantly decreased by 31.7% when compared to the same quarter one year ago, falling from $6.07 million to $4.15 million.
- PETMED EXPRESS INC's earnings per share declined by 29.6% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, PETMED EXPRESS INC reported lower earnings of $0.93 versus $1.16 in the prior year. For the next year, the market is expecting a contraction of 15.1% in earnings ($0.79 versus $0.93).
- PETS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.89, which clearly demonstrates the ability to cover short-term cash needs.
- PETS's revenue growth trails the industry average of 15.0%. Since the same quarter one year prior, revenues slightly increased by 1.2%. 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.