NEW YORK ( TheStreet) -- Volcano Corporation (Nasdaq: VOLC) 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, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and feeble growth in the company's earnings per share.
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- The revenue growth came in higher than the industry average of 8.2%. Since the same quarter one year prior, revenues rose by 13.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although VOLC's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 4.74, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for VOLCANO CORP is currently very high, coming in at 71.60%. Regardless of VOLC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VOLC's net profit margin of 3.50% is significantly lower than the same period one year prior.
- 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 Health Care Equipment & Supplies industry. The net income has significantly decreased by 32.5% when compared to the same quarter one year ago, falling from $4.89 million to $3.30 million.
- The share price of VOLCANO CORP has not done very well: it is down 6.15% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
-- Written by a member of TheStreet Ratings Staff