NEW YORK ( TheStreet) -- Key Tronic Corporation (Nasdaq: KTCC) 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 attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- The revenue growth significantly trails the industry average of 78.1%. Since the same quarter one year prior, revenues slightly increased by 6.8%. 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.
- Although KTCC's debt-to-equity ratio of 0.09 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Computers & Peripherals industry and the overall market, KEY TRONIC CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for KEY TRONIC CORP is currently extremely low, coming in at 8.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.30% significantly trails the industry average.