NEW YORK ( TheStreet) -- A Schulman (Nasdaq: SHLM) 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 attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 22.0%. Since the same quarter one year prior, revenues rose by 45.4%. 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.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
- SCHULMAN (A.) INC's earnings per share declined by 34.1% 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, SCHULMAN (A.) INC increased its bottom line by earning $1.56 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.56).
- The gross profit margin for SCHULMAN (A.) INC is currently extremely low, coming in at 14.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.10% significantly trails the industry average.
- 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 Chemicals industry. The net income has significantly decreased by 27.2% when compared to the same quarter one year ago, falling from $25.76 million to $18.75 million.