NEW YORK ( TheStreet) -- Deer Consumer Products (Nasdaq: DEER) 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 impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 42.6%. Since the same quarter one year prior, revenues rose by 32.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DEER's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.79, which clearly demonstrates the ability to cover short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Household Durables industry and the overall market on the basis of return on equity, DEER CONSUMER PRODUCTS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has decreased to $1.15 million or 14.51% when compared to the same quarter last year. Despite a decrease in cash flow of 14.51%, DEER CONSUMER PRODUCTS INC is still significantly exceeding the industry average of -70.89%.
- DEER's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 61.51%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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