NEW YORK ( TheStreet) -- Transcat (Nasdaq: TRNS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.
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- TRANSCAT INC has improved earnings per share by 14.3% 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, TRANSCAT INC increased its bottom line by earning $0.43 versus $0.37 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.43).
- Despite its growing revenue, the company underperformed as compared with the industry average of 23.6%. Since the same quarter one year prior, revenues rose by 19.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Trading Companies & Distributors industry average. The net income increased by 11.1% when compared to the same quarter one year prior, going from $1.09 million to $1.21 million.
- TRNS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.25%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, TRNS is still more expensive than most of the other companies in its industry.
- The gross profit margin for TRANSCAT INC is currently lower than what is desirable, coming in at 27.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.90% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff