NEW YORK ( TheStreet) -- American Science & Engineering (Nasdaq: ASEI) 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 and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- ASEI's debt-to-equity ratio is very low at 0.02 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 3.96, which clearly demonstrates the ability to cover short-term cash needs.
- 48.10% is the gross profit margin for AMERICAN SCIENCE ENGINEERING which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.40% trails the industry average.
- The revenue fell significantly faster than the industry average of 5.1%. Since the same quarter one year prior, revenues fell by 41.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has significantly decreased to -$0.47 million or 103.39% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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. In comparison to the other companies in the Aerospace & Defense industry and the overall market, AMERICAN SCIENCE ENGINEERING'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