Key Tronic Corporation Stock Downgraded (KTCC)

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.

Key Tronic Corporation, doing business as KeyTronicEMS Co., together with its subsidiaries, provides electronic manufacturing services (EMS) and solutions to original equipment manufacturers in the United States, Mexico, and China. The company has a P/E ratio of 6.1, equal to the average computer hardware industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Key Tronic has a market cap of $35 million and is part of the technology sector and computer hardware industry. Shares are down 34.5% year to date as of the close of trading on Wednesday.

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

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