NEW YORK ( TheStreet) -- Layne Christensen Company (Nasdaq: LAYN) 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 robust revenue growth. 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:
  • LAYNE CHRISTENSEN CO 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, LAYNE CHRISTENSEN CO increased its bottom line by earning $1.54 versus $0.06 in the prior year. This year, the market expects an improvement in earnings ($2.12 versus $1.54).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Construction & Engineering industry. The net income increased by 64.5% when compared to the same quarter one year prior, rising from $6.45 million to $10.61 million.
  • LAYN's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.87 is somewhat weak and could be cause for future problems.
  • The gross profit margin for LAYNE CHRISTENSEN CO is rather low; currently it is at 21.60%. 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 3.60% is above that of the industry average.
  • Net operating cash flow has significantly decreased to -$14.80 million or 192.12% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Layne Christensen Company and its subsidiaries provide drilling and construction services and related products to the water infrastructure and mineral exploration markets. The company has a P/E ratio of 12.2, equal to the average materials & construction industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Layne Christensen has a market cap of $493.2 million and is part of the industrial goods sector and materials & construction industry. Shares are down 28.8% year to date as of the close of trading on Tuesday.

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