NEW YORK ( TheStreet) -- Lexmark International (NYSE: LXK) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.
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- 45.60% is the gross profit margin for LEXMARK INTL INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, LXK's net profit margin of 6.10% significantly trails the industry average.
- Net operating cash flow has slightly increased to $92.10 million or 8.09% when compared to the same quarter last year. Despite an increase in cash flow of 8.09%, LEXMARK INTL INC is still growing at a significantly lower rate than the industry average of 126.05%.
- Looking at the price performance of LXK's shares over the past 12 months, there is not much good news to report: the stock is down 30.44%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 27.0% when compared to the same quarter one year ago, falling from $83.30 million to $60.80 million.
-- Written by a member of TheStreet Ratings Staff