NEW YORK ( TheStreet) -- Rush (Nasdaq: RUSHA) 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, 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 generally poor debt management, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- RUSHA's very impressive revenue growth greatly exceeded the industry average of 15.8%. Since the same quarter one year prior, revenues leaped by 67.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- RUSH ENTERPRISES 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, RUSH ENTERPRISES INC increased its bottom line by earning $1.42 versus $0.65 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.42).
- After a year of stock price fluctuations, the net result is that RUSHA's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Net operating cash flow has significantly decreased to -$30.87 million or 143.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Currently the debt-to-equity ratio of 1.68 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.39, which clearly demonstrates the inability to cover short-term cash needs.
-- Written by a member of TheStreet Ratings Staff