NEW YORK ( TheStreet) -- Generac Holdings (NYSE: GNRC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and feeble growth in the company's earnings per share.
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- The revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 48.2%. 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, GENERAC HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- 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 Electrical Equipment industry. The net income has significantly decreased by 38.9% when compared to the same quarter one year ago, falling from $15.29 million to $9.34 million.
- The debt-to-equity ratio is very high at 2.21 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. To add to this, GNRC has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
-- Written by a member of TheStreet Ratings Staff