NEW YORK ( TheStreet) -- Monro Muffler/Brake (Nasdaq: MNRO) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- MNRO's revenue growth has slightly outpaced the industry average of 6.6%. Since the same quarter one year prior, revenues rose by 13.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MONRO MUFFLER BRAKE INC has improved earnings per share by 23.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MONRO MUFFLER BRAKE INC increased its bottom line by earning $1.69 versus $1.45 in the prior year. This year, the market expects an improvement in earnings ($1.76 versus $1.69).
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, MONRO MUFFLER BRAKE INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 42.10% is the gross profit margin for MONRO MUFFLER BRAKE INC which we consider to be strong. Regardless of MNRO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.10% trails the industry average.
-- Written by a member of TheStreet Ratings Staff