NEW YORK ( TheStreet) -- Canon (NYSE: CAJ) 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, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.
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- CAJ's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.43, which illustrates the ability to avoid short-term cash problems.
- 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 Office Electronics industry average. The net income increased by 11.4% when compared to the same quarter one year prior, going from $670.16 million to $746.73 million.
- The gross profit margin for CANON INC is rather high; currently it is at 54.40%. Regardless of CAJ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CAJ's net profit margin of 7.40% compares favorably to the industry average.
- Net operating cash flow has decreased to $681.06 million or 21.64% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, CANON INC has marginally lower results.
- CAJ'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 33.32%, 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, CAJ is still more expensive than most of the other companies in its industry.
-- Written by a member of TheStreet Ratings Staff