NEW YORK ( TheStreet) -- Brown & Brown (NYSE: BRO) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • BRO's revenue growth trails the industry average of 20.7%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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.
  • BRO's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.30, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has decreased to $71.99 million or 22.53% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Insurance industry. The net income has decreased by 10.1% when compared to the same quarter one year ago, dropping from $41.19 million to $37.04 million.

Brown & Brown, Inc., a diversified insurance agency, markets and sells insurance products and services primarily in the United States. Its Retail segment provides insurance products and services to commercial, public and quasi-public entity, professional, and individual customers. The company has a P/E ratio of 16.5, above the average insurance industry P/E ratio of 16.4 and below the S&P 500 P/E ratio of 17.7. Brown & Brown has a market cap of $2.6 billion and is part of the financial sector and insurance industry. Shares are down 24.1% year to date as of the close of trading on Wednesday.

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