NEW YORK ( TheStreet) -- Monolithic Power Systems (Nasdaq: MPWR) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- MPWR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.06, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for MONOLITHIC POWER SYSTEMS INC is rather high; currently it is at 56.60%. Regardless of MPWR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MPWR's net profit margin of 10.30% is significantly lower than the same period one year prior.
- The revenue fell significantly faster than the industry average of 23.5%. Since the same quarter one year prior, revenues fell by 19.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- After a year of stock price fluctuations, the net result is that MPWR's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- MONOLITHIC POWER SYSTEMS INC 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MONOLITHIC POWER SYSTEMS INC increased its bottom line by earning $0.79 versus $0.53 in the prior year. For the next year, the market is expecting a contraction of 15.2% in earnings ($0.67 versus $0.79).