NEW YORK ( TheStreet) -- Tempur-Pedic International (NYSE: TPX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and solid stock price performance. However, as a counter to these strengths, we find that the company has not been very careful in the management of its balance sheet. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 22.7%. Since the same quarter one year prior, revenues rose by 25.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 27.27% and other important driving factors, this stock has surged by 40.64% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The gross profit margin for TEMPUR PEDIC INTL INC is rather high; currently it is at 54.60%. Regardless of TPX's high profit margin, it has managed to decrease from the same period last year.
- The debt-to-equity ratio is very high at 19.00 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Even though the debt-to-equity ratio is weak, TPX's quick ratio is somewhat strong at 1.39, demonstrating the ability to handle short-term liquidity needs.