NEW YORK ( TheStreet) -- Ituran Location and Control (Nasdaq: ITRN) 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 increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 17.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ITRN'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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.28, which illustrates the ability to avoid short-term cash problems.
- ITURAN LOCATION & CONTROL has improved earnings per share by 34.8% 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, ITURAN LOCATION & CONTROL reported lower earnings of $0.42 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus $0.42).
- In its most recent trading session, ITRN has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Communications Equipment industry and the overall market, ITURAN LOCATION & CONTROL's return on equity is below that of both the industry average and the S&P 500.