NEW YORK ( TheStreet) -- AEP Industries (Nasdaq: AEPI) 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, notable return on equity and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and poor profit margins. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 25.0%. Since the same quarter one year prior, revenues rose by 22.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Containers & Packaging industry and the overall market, AEP INDUSTRIES INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The gross profit margin for AEP INDUSTRIES INC is rather low; currently it is at 15.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.10% trails that of the industry average.
- Net operating cash flow has decreased to -$8.21 million or 15.20% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, AEP INDUSTRIES INC has marginally lower results.
-- Written by a member of TheStreet Ratings Staff