NEW YORK ( TheStreet) -- Heidrick & Struggles International (Nasdaq: HSII) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its 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 came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 13.8%. 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 HSII's debt-to-equity ratio of 0.01 is very low, it is currently higher than that of the industry average. To add to this, HSII has a quick ratio of 1.55, which demonstrates the ability of the company to cover short-term liquidity needs.
- HEIDRICK & STRUGGLES INTL 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, HEIDRICK & STRUGGLES INTL turned its bottom line around by earning $0.42 versus -$1.31 in the prior year. This year, the market expects an improvement in earnings ($1.04 versus $0.42).
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Professional Services industry and the overall market, HEIDRICK & STRUGGLES INTL's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for HEIDRICK & STRUGGLES INTL is currently lower than what is desirable, coming in at 30.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -21.70% is significantly below that of the industry average.