NEW YORK ( TheStreet) -- Baldwin & Lyons (Nasdaq: BWINB) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has decreased to $6.62 million or 43.36% 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.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, BALDWIN & LYONS underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- BWINB's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.