NEW YORK ( TheStreet) -- Mercury Computer Systems (Nasdaq: MRCY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- MRCY'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 this, the company maintains a quick ratio of 5.76, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for MERCURY COMPUTER SYSTEMS INC is rather high; currently it is at 59.50%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.90% is above that of the industry average.
- MRCY, with its decline in revenue, underperformed when compared the industry average of 16.2%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 77.2% when compared to the same quarter one year ago, falling from $18.65 million to $4.25 million.
- 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 Electronic Equipment, Instruments & Components industry and the overall market, MERCURY COMPUTER SYSTEMS INC's return on equity is below that of both the industry average and the S&P 500.