NEW YORK ( TheStreet) -- Data I/O Corporation (Nasdaq: DAIO) 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and unimpressive growth in net income.

Highlights from the ratings report include:
  • DAIO's revenue growth trails the industry average of 15.7%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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.
  • DAIO's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.08, which clearly demonstrates the ability to cover short-term cash needs.
  • DATA I/O CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, DATA I/O CORP turned its bottom line around by earning $0.33 versus -$0.09 in the prior year.
  • The change in net income from the same quarter one year ago has exceeded that of the Electronic Equipment, Instruments & Components industry average, but is less than that of the S&P 500. The net income has significantly decreased by 53.6% when compared to the same quarter one year ago, falling from $0.86 million to $0.40 million.
  • Net operating cash flow has significantly decreased to $0.45 million or 69.55% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

Data I/O Corporation designs, manufactures, and sells programming systems used by designers and manufacturers of electronic products principally in the United States, Europe, and the Far East. The company has a P/E ratio of 20.4, equal to the average electronics industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Data I/O has a market cap of $49.1 million and is part of the technology sector and electronics industry. Shares are down 7.7% year to date as of the close of trading on Friday.

You can view the full Data I/O Ratings Report or get investment ideas from our investment research center.
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