NEW YORK ( TheStreet) -- Callaway Golf Company (NYSE: ELY) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 74.56% to -$11.76 million when compared to the same quarter last year. In addition, CALLAWAY GOLF CO has also vastly surpassed the industry average cash flow growth rate of -2.15%.
  • ELY 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.97 is somewhat weak and could be cause for future problems.
  • ELY, with its decline in revenue, underperformed when compared the industry average of 0.8%. Since the same quarter one year prior, revenues fell by 17.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Leisure Equipment & Products industry and the overall market, CALLAWAY GOLF CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CALLAWAY GOLF CO is currently lower than what is desirable, coming in at 33.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -40.90% is significantly below that of the industry average.

Callaway Golf Company, together with its subsidiaries, designs, manufactures, and sells golf clubs and golf balls. The company's golf clubs include drivers, fairway woods, hybrids, irons, wedges, and putters. Callaway has a market cap of $402.3 million and is part of the consumer goods sector and consumer durables industry. Shares are up 25% year to date as of the close of trading on Wednesday.

You can view the full Callaway Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff