NEW YORK ( TheStreet) -- Electrobras-Centrais Electricas Brasileiras (NYSE: EBR) 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 attractive valuation levels. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- The gross profit margin for ELETROBRAS-CENTR ELETR BRAS is currently lower than what is desirable, coming in at 25.20%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 9.70% is above that of the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, ELETROBRAS-CENTR ELETR BRAS underperformed against that of the industry average and is significantly less than that of the S&P 500.
- ELETROBRAS-CENTR ELETR BRAS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ELETROBRAS-CENTR ELETR BRAS swung to a loss, reporting -$0.83 versus $3.27 in the prior year. This year, the market expects an improvement in earnings ($2.91 versus -$0.83).
- EBR's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- EBR's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 7.8%. Growth in the company's revenue appears to have helped boost the earnings per share.