NEW YORK ( TheStreet) -- G & K Services (Nasdaq: GKSR) 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, attractive valuation levels 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 poor profit margins. Highlights from the ratings report include:
- GKSR's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 4.7%. 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.
- Although GKSR's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Despite the fact that GKSR's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
- The gross profit margin for G&K SERVICES INC is currently lower than what is desirable, coming in at 34.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.00% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$7.37 million or 156.80% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.