NEW YORK ( TheStreet) -- Breeze-Eastern Corporation (AMEX: BZC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 18.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- BZC'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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.26, which illustrates the ability to avoid short-term cash problems.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, BREEZE-EASTERN CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has significantly decreased to $0.48 million or 89.43% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.