NEW YORK ( TheStreet) -- Landec Corporation (Nasdaq: LNDC) 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 and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.4%. Since the same quarter one year prior, revenues rose by 17.0%. 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.
- LNDC's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, LNDC has a quick ratio of 1.92, which demonstrates the ability of the company to cover short-term liquidity needs.
- LANDEC 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. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, LANDEC CORP increased its bottom line by earning $0.16 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.16).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Chemicals industry and the overall market, LANDEC CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for LANDEC CORP is rather low; currently it is at 15.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.00% is significantly below that of the industry average.