NEW YORK ( TheStreet) -- Omega Protein Corporation (NYSE: OME) 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, poor profit margins and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 24.6%. Since the same quarter one year prior, revenues rose by 28.1%. 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.
- OME's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has slightly increased to $15.73 million or 8.61% when compared to the same quarter last year. Despite an increase in cash flow of 8.61%, OMEGA PROTEIN CORP is still growing at a significantly lower rate than the industry average of 120.38%.
- The gross profit margin for OMEGA PROTEIN CORP is rather low; currently it is at 24.30%. Regardless of OME'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 6.60% trails the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 35.13% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
-- Written by a member of TheStreet Ratings Staff