NEW YORK ( TheStreet) -- Culp (NYSE: CFI) 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, 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 deteriorating net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • CFI's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 7.8%. 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.
  • CFI's debt-to-equity ratio is very low at 0.14 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 1.29, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly decreased to -$3.64 million or 1151.54% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 51.4% when compared to the same quarter one year ago, falling from $3.75 million to $1.82 million.

Culp, Inc. manufactures, sources, and markets mattress fabrics and upholstery fabrics to the furniture and bedding industries in North America and internationally. The company operates in two segments, Mattress Fabrics and Upholstery Fabrics. The company has a P/E ratio of 6.9, equal to the average industrial industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Culp has a market cap of $112 million and is part of the industrial goods sector and industrial industry. Shares are down 14.4% year to date as of the close of trading on Tuesday.

You can view the full Culp Ratings Report or get investment ideas from our investment research center.
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