NEW YORK ( TheStreet) -- Orbotech (Nasdaq: ORBK) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- ORBK's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.12, which clearly demonstrates the ability to cover short-term cash needs.
- ORBOTECH LTD's earnings per share declined by 37.0% in the most recent quarter compared to 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, ORBOTECH LTD turned its bottom line around by earning $1.20 versus -$0.46 in the prior year. This year, the market expects an improvement in earnings ($1.44 versus $1.20).
- 43.40% is the gross profit margin for ORBOTECH LTD which we consider to be strong. Regardless of ORBK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ORBK's net profit margin of 10.20% compares favorably to the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, ORBOTECH LTD's return on equity is below that of both the industry average and the S&P 500.
- The share price of ORBOTECH LTD has not done very well: it is down 7.70% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.