NEW YORK ( TheStreet) -- Dril-Quip (NYSE: DRQ) 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, expanding profit margins 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:
  • DRQ's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.19, which clearly demonstrates the ability to cover short-term cash needs.
  • 43.70% is the gross profit margin for DRIL-QUIP INC which we consider to be strong. Regardless of DRQ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DRQ's net profit margin of 16.20% compares favorably to the industry average.
  • The revenue fell significantly faster than the industry average of 47.5%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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. When compared to other companies in the Energy Equipment & Services industry and the overall market, DRIL-QUIP INC's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$5.13 million or 124.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Dril-Quip, Inc. designs, manufactures, fabricates, inspects, assembles, tests, and markets engineered offshore drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide. The company has a P/E ratio of 24.4, above the average energy industry P/E ratio of 22.9 and above the S&P 500 P/E ratio of 17.7. Dril-Quip has a market cap of $2.2 billion and is part of the basic materials sector and energy industry. Shares are down 35.1% year to date as of the close of trading on Tuesday.

You can view the full Dril-Quip Ratings Report or get investment ideas from our investment research center.
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