NEW YORK ( TheStreet) -- Universal Corporation (NYSE: UVV) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins and disappointing return on equity.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Tobacco industry. The net income increased by 45.5% when compared to the same quarter one year prior, rising from $15.89 million to $23.13 million.
- Powered by its strong earnings growth of 55.76% and other important driving factors, this stock has surged by 25.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- UNIVERSAL CORP/VA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, UNIVERSAL CORP/VA reported lower earnings of $2.98 versus $5.42 in the prior year. This year, the market expects an improvement in earnings ($4.50 versus $2.98).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Tobacco industry and the overall market on the basis of return on equity, UNIVERSAL CORP/VA has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The gross profit margin for UNIVERSAL CORP/VA is rather low; currently it is at 22.30%. Regardless of UVV's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, UVV's net profit margin of 5.00% is significantly lower than the same period one year prior.
-- Written by a member of TheStreet Ratings Staff