NEW YORK ( TheStreet) -- Universal Technical Institute (NYSE: UTI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income. Highlights from the ratings report include:
- UTI 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for UNIVERSAL TECHNICAL INST is rather high; currently it is at 56.00%. Regardless of UTI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.80% trails the industry average.
- UNIVERSAL TECHNICAL INST has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, UNIVERSAL TECHNICAL INST reported lower earnings of $1.10 versus $1.17 in the prior year. For the next year, the market is expecting a contraction of 48.2% in earnings ($0.57 versus $1.10).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 60.6% when compared to the same quarter one year ago, falling from $10.26 million to $4.04 million.
-- Written by a member of TheStreet Ratings Staff