NEW YORK ( TheStreet) -- Heritage-Crystal Clean (Nasdaq: HCCI) 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 good cash flow from operations. 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:
- The revenue growth greatly exceeded the industry average of 1.8%. Since the same quarter one year prior, revenues rose by 39.3%. 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 HCCI's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
- Compared to its closing price of one year ago, HCCI's share price has jumped by 37.92%, 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.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Services & Supplies industry and the overall market, HERITAGE-CRYSTAL CLEAN INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for HERITAGE-CRYSTAL CLEAN INC is rather low; currently it is at 18.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.60% trails that of the industry average.