NEW YORK ( TheStreet) -- PetMed Express (Nasdaq: PETS) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and deteriorating net income. Highlights from the ratings report include:
- PETS's revenue growth trails the industry average of 21.8%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PETS 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 6.25, which clearly demonstrates the ability to cover short-term cash needs.
- PETS has underperformed the S&P 500 Index, declining 11.17% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for PETMED EXPRESS INC is currently lower than what is desirable, coming in at 33.90%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 7.10% is above that of the industry average.
-- Written by a member of TheStreet Ratings Staff