NEW YORK ( TheStreet) -- GSE Systems (AMEX: GVP) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.4%. Since the same quarter one year prior, revenues rose by 21.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- GVP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.60, which clearly demonstrates the ability to cover short-term cash needs.
- GSE SYSTEMS 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GSE SYSTEMS INC turned its bottom line around by earning $0.15 versus -$0.12 in the prior year. For the next year, the market is expecting a contraction of 40.0% in earnings ($0.09 versus $0.15).
- In its most recent trading session, GVP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for GSE SYSTEMS INC is currently lower than what is desirable, coming in at 31.30%. Regardless of GVP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GVP's net profit margin of 7.80% is significantly lower than the same period one year prior.
-- Written by a member of TheStreet RatingsStaff