NEW YORK ( TheStreet) -- ABM Industries (NYSE: ABM) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 0.0%. Since the same quarter one year prior, revenues rose by 23.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ABM INDUSTRIES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ABM INDUSTRIES INC increased its bottom line by earning $1.21 versus $1.07 in the prior year. This year, the market expects an improvement in earnings ($1.45 versus $1.21).
- Despite currently having a low debt-to-equity ratio of 0.52, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.44 is sturdy.
- ABM has underperformed the S&P 500 Index, declining 10.21% from its price level of one year ago. 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.
- Net operating cash flow has decreased to $31.88 million or 40.11% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.