NEW YORK ( TheStreet) -- Kaydon Corporation (NYSE: KDN) 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 a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The revenue growth significantly trails the industry average of 36.1%. Since the same quarter one year prior, revenues slightly increased by 0.4%. 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.
- KDN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.43, which clearly demonstrates the ability to cover short-term cash needs.
- KAYDON CORP's earnings per share declined by 18.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KAYDON CORP increased its bottom line by earning $1.67 versus $1.37 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.67).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has decreased by 20.5% when compared to the same quarter one year ago, dropping from $17.82 million to $14.16 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 Machinery industry and the overall market, KAYDON CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.