NEW YORK ( TheStreet) -- Cal-Maine Foods (Nasdaq: CALM) 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 feeble growth in the company's earnings per share, deteriorating net income and poor profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 28.1%. 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.
- CALM's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CALM has a quick ratio of 2.17, which demonstrates the ability of the company to cover short-term liquidity needs.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 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 Food Products industry. The net income has significantly decreased by 34.5% when compared to the same quarter one year ago, falling from $4.76 million to $3.12 million.
- The gross profit margin for CAL-MAINE FOODS INC is rather low; currently it is at 17.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.30% trails that of the industry average.