NEW YORK ( TheStreet) -- Clearwater Paper (NYSE: CLW) has been downgraded by TheStreet Ratings from buy to hold. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and generally poor debt management. Highlights from the ratings report include:
- CLW, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Paper & Forest Products industry average, but is less than that of the S&P 500. The net income has significantly decreased by 33.5% when compared to the same quarter one year ago, falling from $5.60 million to $3.73 million.
- CLEARWATER PAPER CORP's earnings per share declined by 31.9% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CLEARWATER PAPER CORP reported lower earnings of $1.67 versus $3.13 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $1.67).
- The debt-to-equity ratio of 1.09 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, CLW's quick ratio is somewhat strong at 1.33, demonstrating the ability to handle short-term liquidity needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Paper & Forest Products industry and the overall market, CLEARWATER PAPER CORP'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