NEW YORK ( TheStreet) -- Penford Corporation (Nasdaq: PENX) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and increase in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 15.4%. Since the same quarter one year prior, revenues rose by 25.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PENFORD CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PENFORD CORP continued to lose money by earning -$0.42 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus -$0.42).
- PENX's debt-to-equity ratio of 0.72 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.09 is sturdy.
- PENX has underperformed the S&P 500 Index, declining 17.28% from its price level of one year ago. 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.
- The gross profit margin for PENFORD CORP is rather low; currently it is at 16.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.70% trails that of the industry average.