NEW YORK ( TheStreet) -- Deltic Timber Corporation (NYSE: DEL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and premium valuation. Highlights from the ratings report include:
- DEL's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that DEL's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.
- Compared to its closing price of one year ago, DEL's share price has jumped by 56.41%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 18.0%. Since the same quarter one year prior, revenues fell by 15.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for DELTIC TIMBER CORP is currently lower than what is desirable, coming in at 29.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.30% trails that of the industry average.
- Net operating cash flow has significantly decreased to $6.17 million or 50.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.