NEW YORK ( TheStreet) -- AAR (NYSE: AIR) 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, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow 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 5.2%. Since the same quarter one year prior, revenues rose by 16.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- AAR CORP has improved earnings per share by 13.6% 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, AAR CORP increased its bottom line by earning $1.77 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus $1.77).
- The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that AIR's debt-to-equity ratio is low, the quick ratio, which is currently 0.70, displays a potential problem in covering short-term cash needs.
- The gross profit margin for AAR CORP is rather low; currently it is at 16.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.90% trails that of the industry average.
- Net operating cash flow has significantly decreased to $13.43 million or 55.36% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet Ratings Staff