NEW YORK ( TheStreet) -- Federal Signal (NYSE: FSS) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- FEDERAL SIGNAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FEDERAL SIGNAL CORP continued to lose money by earning -$0.23 versus -$2.60 in the prior year. This year, the market expects an improvement in earnings ($0.40 versus -$0.23).
- Even though the current debt-to-equity ratio is 1.27, it is still below the industry average, suggesting that this level of debt is acceptable within the Machinery industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.92 is weak.
- The gross profit margin for FEDERAL SIGNAL CORP is currently lower than what is desirable, coming in at 27.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.40% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $3.50 million or 81.18% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet RatingsStaff