NEW YORK ( TheStreet) -- Gencor Industries (Nasdaq: GENC) 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, increase in stock price during the past year and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins. 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 Machinery industry. The net income has decreased by 9.1% when compared to the same quarter one year ago, dropping from $2.70 million to $2.45 million.
- Net operating cash flow has decreased to $4.87 million or 10.68% 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.
- GENCOR INDUSTRIES INC's earnings per share declined by 7.1% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, GENCOR INDUSTRIES INC turned its bottom line around by earning $0.32 versus -$0.27 in the prior year.
- 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.
- GENC 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 6.34, which clearly demonstrates the ability to cover short-term cash needs.