NEW YORK ( TheStreet) -- X-Rite (Nasdaq: XRIT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the stock has experienced relatively poor performance when compared with the S&P 500 during the past year. Highlights from the ratings report include:
- X-RITE 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, X-RITE INC turned its bottom line around by earning $0.04 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus $0.04).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 341.1% when compared to the same quarter one year prior, rising from $1.94 million to $8.56 million.
- The gross profit margin for X-RITE INC is rather high; currently it is at 67.70%. Regardless of XRIT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, XRIT's net profit margin of 13.20% significantly outperformed against the industry.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, X-RITE INC's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, XRIT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.