NEW YORK ( TheStreet) -- Summer Infant (Nasdaq: SUMR) 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, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 27.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.37, which illustrates the ability to avoid short-term cash problems.
- SUMMER INFANT INC's earnings per share declined by 15.4% 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, SUMMER INFANT INC increased its bottom line by earning $0.40 versus $0.37 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.40).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Leisure Equipment & Products industry and the overall market, SUMMER INFANT INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for SUMMER INFANT INC is currently lower than what is desirable, coming in at 34.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.30% significantly trails the industry average.
-- Written by a member of TheStreet Ratings Staff