NEW YORK ( TheStreet) -- Zep (NYSE: ZEP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity. Highlights from the ratings report include:
- ZEP INC has improved earnings per share by 21.7% 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, ZEP INC increased its bottom line by earning $0.60 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.60).
- ZEP's revenue growth trails the industry average of 21.7%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the Chemicals industry average, but is less than that of the S&P 500. The net income increased by 19.3% when compared to the same quarter one year prior, going from $5.23 million to $6.24 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Chemicals industry and the overall market, ZEP INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- ZEP has underperformed the S&P 500 Index, declining 14.78% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.