NEW YORK ( TheStreet) -- Napco Security Systems (Nasdaq: NSSC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- NAPCO SECURITY TECH INC 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 two years. During the past fiscal year, NAPCO SECURITY TECH INC turned its bottom line around by earning $0.06 versus -$0.35 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 96.8% when compared to the same quarter one year prior, rising from $0.16 million to $0.31 million.
- The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
- The gross profit margin for NAPCO SECURITY TECH INC is currently lower than what is desirable, coming in at 30.90%. Regardless of NSSC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.80% trails the industry average.
- Net operating cash flow has significantly decreased to $0.35 million or 66.21% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff