NEW YORK ( TheStreet) -- Dril-Quip (NYSE: DRQ) 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, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 14.3%. Since the same quarter one year prior, revenues rose by 28.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DRQ 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 3.14, which clearly demonstrates the ability to cover short-term cash needs.
- DRIL-QUIP INC has improved earnings per share by 31.5% 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, DRIL-QUIP INC reported lower earnings of $2.37 versus $2.55 in the prior year. This year, the market expects an improvement in earnings ($2.90 versus $2.37).
- DRQ has underperformed the S&P 500 Index, declining 10.92% from its price level of one year ago. 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's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Energy Equipment & Services industry and the overall market, DRIL-QUIP INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff