NEW YORK ( TheStreet) -- Lifeway Foods (Nasdaq: LWAY) 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 increase in net income. 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 premium valuation. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 21.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although LWAY's debt-to-equity ratio of 0.24 is very low, it is currently higher than that of the industry average. 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.
- LIFEWAY FOODS INC has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LIFEWAY FOODS INC reported lower earnings of $0.22 versus $0.33 in the prior year. This year, the market expects an improvement in earnings ($0.29 versus $0.22).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Food Products industry and the overall market, LIFEWAY FOODS INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff