NEW YORK ( TheStreet) -- Gen-Probe (Nasdaq: GPRO) 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, expanding profit margins 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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 GEN-PROBE INC is currently very high, coming in at 77.60%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -11.00% is in-line with the industry average.
  • GEN-PROBE INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GEN-PROBE INC increased its bottom line by earning $2.17 versus $1.79 in the prior year. This year, the market expects an improvement in earnings ($2.32 versus $2.17).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, GEN-PROBE INC's return on equity is below that of both the industry average and the S&P 500.

Gen-Probe Incorporated engages in the development, manufacture, and marketing of molecular diagnostic products and services that are used primarily to diagnose human diseases and screen donated human blood. The company has a P/E ratio of 28.1, equal to the average diversified services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Gen-Probe has a market cap of $2.8 billion and is part of the services sector and diversified services industry. Shares are down 1.2% year to date as of the close of trading on Thursday.

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