NEW YORK ( TheStreet) -- Pepco Holdings Inc (NYSE: POM) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 274.1% when compared to the same quarter one year prior, rising from -$54.00 million to $94.00 million.
  • PEPCO HOLDINGS INC has improved earnings per share by 23.5% in the most recent quarter compared to 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, PEPCO HOLDINGS INC reported lower earnings of $0.62 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus $0.62).
  • POM, with its decline in revenue, underperformed when compared the industry average of 12.6%. Since the same quarter one year prior, revenues fell by 13.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The debt-to-equity ratio of 1.09 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, POM has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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 Electric Utilities industry and the overall market, PEPCO HOLDINGS INC's return on equity is below that of both the industry average and the S&P 500.

Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. The company has a P/E ratio of 21.6, above the average utilities industry P/E ratio of 19.7 and above the S&P 500 P/E ratio of 17.7. Pepco has a market cap of $4.1 billion and is part of the utilities sector and utilities industry. Shares are down 7.1% year to date as of the close of trading on Tuesday.

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

null