NEW YORK ( TheStreet) -- Heritage-Crystal Clean (Nasdaq: HCCI) 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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- HCCI's very impressive revenue growth greatly exceeded the industry average of 2.3%. Since the same quarter one year prior, revenues leaped by 75.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that HCCI's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
- HERITAGE-CRYSTAL CLEAN INC reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, HERITAGE-CRYSTAL CLEAN INC reported lower earnings of $0.10 versus $0.26 in the prior year. This year, the market expects an improvement in earnings ($0.58 versus $0.10).
- The gross profit margin for HERITAGE-CRYSTAL CLEAN INC is rather low; currently it is at 16.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.50% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$4.32 million or 196.63% 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