NEW YORK ( TheStreet) -- Shengkai Innovations (Nasdaq: VALV) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- VALV's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 14.31, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Machinery industry and the overall market, SHENGKAI INNOVATIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for SHENGKAI INNOVATIONS INC is rather high; currently it is at 50.90%. Regardless of VALV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VALV's net profit margin of 8.60% compares favorably to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 96.5% when compared to the same quarter one year ago, falling from $26.95 million to $0.94 million.
- Net operating cash flow has significantly decreased to $1.96 million or 51.89% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.