NEW YORK ( TheStreet) -- NACCO Industries (NYSE: NC) 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, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 37.8%. Since the same quarter one year prior, revenues rose by 37.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.74, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $64.70 million or 17.85% when compared to the same quarter last year. Despite an increase in cash flow, NACCO INDUSTRIES's cash flow growth rate is still lower than the industry average growth rate of 63.88%.
- NC's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.94%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The gross profit margin for NACCO INDUSTRIES is rather low; currently it is at 18.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.40% trails that of the industry average.