NEW YORK ( TheStreet) -- Aerovironment Incorporated (Nasdaq: AVAV) 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, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow. Highlights from the ratings report include:
- AVAV 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 this, the company maintains a quick ratio of 5.23, which clearly demonstrates the ability to cover short-term cash needs.
- AEROVIRONMENT INC's earnings per share declined by 50.0% 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, AEROVIRONMENT INC increased its bottom line by earning $1.16 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($1.29 versus $1.16).
- 41.30% is the gross profit margin for AEROVIRONMENT INC which we consider to be strong. Regardless of AVAV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AVAV's net profit margin of 8.00% compares favorably to the industry average.
- The share price of AEROVIRONMENT INC has not done very well: it is down 20.44% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- 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 Aerospace & Defense industry. The net income has significantly decreased by 49.9% when compared to the same quarter one year ago, falling from $11.45 million to $5.74 million.
-- Written by a member of TheStreet Ratings Staff