NEW YORK ( TheStreet) -- MGP Ingredients (Nasdaq: MGPI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. 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 weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 21.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Beverages industry. The net income increased by 398.0% when compared to the same quarter one year prior, rising from $3.24 million to $16.14 million.
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that MGPI's debt-to-equity ratio is low, the quick ratio, which is currently 0.61, displays a potential problem in covering short-term cash needs.
- MGPI'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 31.87%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, MGPI is still more expensive than most of the other companies in its industry.
- 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. Compared to other companies in the Beverages industry and the overall market, MGP INGREDIENTS INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet RatingsStaff