NEW YORK ( TheStreet) -- Elecsys Corporation (Nasdaq: ESYS) 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 company's return on equity has been disappointing.

Highlights from the ratings report include:
  • ELECSYS CORP 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. During the past fiscal year, ELECSYS CORP turned its bottom line around by earning $0.22 versus -$0.19 in the prior year.
  • 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 99.1% when compared to the same quarter one year prior, rising from $0.11 million to $0.21 million.
  • 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. 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.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, ELECSYS CORP's return on equity is below that of both the industry average and the S&P 500.

Elecsys Corporation develops and manufactures machine to machine (M2M) data acquisition, telemetry, analysis systems, and custom electronic assemblies for critical industries worldwide. The company has a P/E ratio of 19.7, above the average consumer durables industry P/E ratio of 18.9 and above the S&P 500 P/E ratio of 17.7. Elecsys has a market cap of $17.9 million and is part of the consumer goods sector and consumer durables industry. Shares are up 17.3% year to date as of the close of trading on Friday.

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