NEW YORK ( TheStreet) -- Northern Technologies International (Nasdaq: NTIC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- NTIC's revenue growth trails the industry average of 25.7%. Since the same quarter one year prior, revenues slightly increased by 4.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- NTIC's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.68, which clearly demonstrates the ability to cover short-term cash needs.
- NORTHERN TECH INTL's earnings per share declined by 36.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NORTHERN TECH INTL increased its bottom line by earning $0.90 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $0.90).
- 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 Containers & Packaging industry. The net income has significantly decreased by 36.1% when compared to the same quarter one year ago, falling from $0.95 million to $0.61 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Containers & Packaging industry and the overall market, NORTHERN TECH INTL's return on equity is significantly below that of the industry average and is below that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff