NEW YORK ( TheStreet) -- Cree (Nasdaq: CREE) 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, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income 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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 57.7% when compared to the same quarter one year ago, falling from $44.63 million to $18.88 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.74%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 58.53% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, CREE is still more expensive than most of the other companies in its industry.
- CREE, with its decline in revenue, slightly underperformed the industry average of 0.4%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CREE INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, CREE INC increased its bottom line by earning $1.44 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.44).
- CREE 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 9.82, which clearly demonstrates the ability to cover short-term cash needs.