NEW YORK ( TheStreet) -- Greif (NYSE: GEF) 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, attractive valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 22.7%. Since the same quarter one year prior, revenues rose by 21.8%. 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.
- GREIF INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, GREIF INC increased its bottom line by earning $4.42 versus $2.35 in the prior year. For the next year, the market is expecting a contraction of 5.0% in earnings ($4.20 versus $4.42).
- Net operating cash flow has significantly decreased to $35.23 million or 59.88% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, GEF maintains a poor quick ratio of 0.80, which illustrates the inability to avoid short-term cash problems.