NEW YORK ( TheStreet) -- Omnova Solutions (NYSE: OMN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and generally poor debt management.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 22.2%. Since the same quarter one year prior, revenues rose by 45.3%. 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.
  • The gross profit margin for OMNOVA SOLUTIONS INC is rather low; currently it is at 16.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.10% significantly trails the industry average.
  • 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 Chemicals industry. The net income has significantly decreased by 88.6% when compared to the same quarter one year ago, falling from $3.50 million to $0.40 million.

OMNOVA Solutions Inc. provides emulsion polymers, specialty chemicals, and decorative and functional surfaces for commercial, industrial, and residential end uses primarily in North America, Asia, and Europe. The company operates in two segments, Performance Chemicals and Decorative Products. The company has a P/E ratio of 1.5, below the average chemicals industry P/E ratio of 1.7 and below the S&P 500 P/E ratio of 17.7. Omnova has a market cap of $153.6 million and is part of the basic materials sector and chemicals industry. Shares are down 61.1% year to date as of the close of trading on Monday.

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