NEW YORK ( TheStreet) -- Furmanite Corporation (NYSE: FRM) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • FURMANITE CORP has improved earnings per share by 40.0% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FURMANITE CORP turned its bottom line around by earning $0.26 versus -$0.08 in the prior year. This year, the market expects an improvement in earnings ($0.47 versus $0.26).
  • Despite currently having a low debt-to-equity ratio of 0.32, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that FRM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.43 is high and demonstrates strong liquidity.
  • The gross profit margin for FURMANITE CORP is currently lower than what is desirable, coming in at 32.10%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 6.20% is above that of the industry average.
  • Net operating cash flow has significantly decreased to -$1.94 million or 178.55% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Furmanite Corporation, through its subsidiaries, provides technical services in Europe, North America, South America, Latin America, the Middle East, Africa, and the Asia Pacific. The company has a P/E ratio of 13, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Furmanite has a market cap of $192.7 million and is part of the services sector and diversified services industry. Shares are down 22.4% year to date as of the close of trading on Wednesday.

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