NEW YORK ( TheStreet) -- Park-Ohio Holdings Corporation (Nasdaq: PKOH) 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, notable return on equity and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management 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 Air Freight & Logistics industry. The net income has significantly decreased by 132.4% when compared to the same quarter one year ago, falling from $3.42 million to -$1.11 million.
- The debt-to-equity ratio is very high at 5.94 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Even though the debt-to-equity ratio is weak, PKOH's quick ratio is somewhat strong at 1.21, demonstrating the ability to handle short-term liquidity needs.
- PARK OHIO HOLDINGS CORP 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, PARK OHIO HOLDINGS CORP turned its bottom line around by earning $1.29 versus -$0.48 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.29).
- Compared to its closing price of one year ago, PKOH's share price has jumped by 50.53%, exceeding the performance of the broader market during that same time frame. Although PKOH had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The revenue growth came in higher than the industry average of 8.2%. Since the same quarter one year prior, revenues rose by 24.5%. 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.