NEW YORK ( TheStreet) -- RCM Technologies (Nasdaq: RCMT) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its reasonable valuation levels, considering its current price compared to earnings, book value and other measures. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and poor profit margins.

Highlights from the ratings report include:
  • The revenue fell significantly faster than the industry average of 18.7%. Since the same quarter one year prior, revenues fell by 14.7%. The declining revenue appears to have seeped down to the company's 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. Compared to other companies in the Professional Services industry and the overall market on the basis of return on equity, RCM TECHNOLOGIES INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for RCM TECHNOLOGIES INC is currently lower than what is desirable, coming in at 28.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.40% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$2.21 million or 131.94% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

RCM Technologies, Inc., together with its subsidiaries, engages in the design, development, and delivery of business and technology solutions for commercial and government sectors in North America. The company has a P/E ratio of 11.6, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. RCM has a market cap of $59.3 million and is part of the services sector and diversified services industry. Shares are up 3.7% year to date as of the close of trading on Wednesday.

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