NEW YORK ( TheStreet) -- Rush (Nasdaq: RUSHB) 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 generally poor debt management, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- The debt-to-equity ratio of 1.20 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.34, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has decreased to -$17.33 million or 48.36% 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.
- Powered by its strong earnings growth of 216.66% and other important driving factors, this stock has surged by 50.27% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
- RUSH ENTERPRISES INC reported significant earnings per share improvement 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, RUSH ENTERPRISES INC increased its bottom line by earning $0.65 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($1.27 versus $0.65).
- The revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 49.0%. Growth in the company's revenue appears to have helped boost the earnings per share.