NEW YORK ( TheStreet) -- Flextronics International (Nasdaq: FLEX) has been upgraded by TheStreet Ratings from hold to buy. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- FLEXTRONICS INTERNATIONAL's earnings per share declined by 46.1% in the most recent quarter compared to 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, FLEXTRONICS INTERNATIONAL increased its bottom line by earning $0.75 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.75).
- The revenue fell significantly faster than the industry average of 44.4%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Electronic Equipment, Instruments & Components industry and the overall market, FLEXTRONICS INTERNATIONAL's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The share price of FLEXTRONICS INTERNATIONAL has not done very well: it is down 19.62% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- FLEX's debt-to-equity ratio of 0.99 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. Despite the fact that FLEX's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.59 is low and demonstrates weak liquidity.