NEW YORK ( TheStreet) -- Sharps Compliance Corporation (Nasdaq: SMED) 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, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 12.4%. Since the same quarter one year prior, revenues rose by 34.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SMED 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 4.87, which clearly demonstrates the ability to cover short-term cash needs.
- SHARPS COMPLIANCE CORP reported significant earnings per share improvement 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, SHARPS COMPLIANCE CORP swung to a loss, reporting -$0.19 versus $0.64 in the prior year. This year, the market expects an improvement in earnings (-$0.11 versus -$0.19).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Health Care Providers & Services industry and the overall market, SHARPS COMPLIANCE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SHARPS COMPLIANCE CORP is currently lower than what is desirable, coming in at 34.60%. Regardless of SMED's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.50% trails the industry average.