NEW YORK ( TheStreet) -- American Greetings Corporation (NYSE: AM) 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, increase in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 7.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AM's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.96 is somewhat weak and could be cause for future problems.
  • AM has underperformed the S&P 500 Index, declining 14.73% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Household Durables industry and the overall market, AMERICAN GREETINGS's return on equity is below that of both the industry average and the S&P 500.

American Greetings Corporation, together with its subsidiaries, engages in the design, manufacture, and sale of greeting cards and other social expression products worldwide. The company has a P/E ratio of 7.5, equal to the average specialty retail industry P/E ratio and below the S&P 500 P/E ratio of 17.7. American Greetings has a market cap of $677.1 million and is part of the services sector and specialty retail industry. Shares are down 23.2% year to date as of the close of trading on Monday.

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