NEW YORK ( TheStreet) -- Brady Corporation (NYSE: BRC) 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, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and deteriorating net income.
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- The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, BRC has a quick ratio of 2.26, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has slightly increased to $57.29 million or 8.43% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -27.28%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the Electrical Equipment industry average, but is less than that of the S&P 500. The net income has decreased by 3.3% when compared to the same quarter one year ago, dropping from $28.59 million to $27.65 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Electrical Equipment industry and the overall market, BRADY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff