NEW YORK ( TheStreet) -- UTi Worldwide (Nasdaq: UTIW) 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 Air Freight & Logistics industry. The net income has decreased by 13.2% when compared to the same quarter one year ago, dropping from $10.07 million to $8.74 million.
- Net operating cash flow has significantly decreased to -$43.63 million or 53.20% 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.
- Compared to its closing price of one year ago, UTIW's share price has jumped by 32.50%, 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 current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.12, which illustrates the ability to avoid short-term cash problems.
- UTIW's revenue growth has slightly outpaced the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 13.6%. 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.