NEW YORK ( TheStreet) -- Communications Systems (Nasdaq: JCS) 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, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- JCS'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 4.49, which clearly demonstrates the ability to cover short-term cash needs.
- 43.50% is the gross profit margin for COMMUNICATIONS SYSTEMS INC which we consider to be strong. Regardless of JCS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, JCS's net profit margin of 0.20% is significantly lower than the same period one year prior.
- Net operating cash flow has significantly decreased to -$3.45 million or 1060.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Communications Equipment industry and the overall market, COMMUNICATIONS SYSTEMS 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