NEW YORK ( TheStreet) -- HHGregg Incorporated (NYSE: HGG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- 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 Specialty Retail industry and the overall market on the basis of return on equity, HHGREGG INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- HGG's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.03%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Despite the fact that HGG's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.61 is low and demonstrates weak liquidity.
- HHGREGG INC has improved earnings per share by 44.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HHGREGG INC increased its bottom line by earning $1.19 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($1.31 versus $1.19).
- The revenue growth greatly exceeded the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 21.5%. Growth in the company's revenue appears to have helped boost the earnings per share.