NEW YORK ( TheStreet) -- Lifeway Foods (Nasdaq: LWAY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and premium valuation. Highlights from the ratings report include:
- The revenue growth significantly trails the industry average of 125.4%. Since the same quarter one year prior, revenues rose by 27.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although LWAY's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
- LIFEWAY FOODS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LIFEWAY FOODS INC reported lower earnings of $0.22 versus $0.33 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus $0.22).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food Products industry. The net income has significantly decreased by 77.6% when compared to the same quarter one year ago, falling from $1.18 million to $0.27 million.
- The share price of LIFEWAY FOODS INC has not done very well: it is down 8.78% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.