Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model NEW YORK ( TheStreet) -- Gentex Corporation (Nasdaq: GNTX) 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, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, poor profit margins and disappointing return on equity.
- ACTIVE STOCK TRADERS: Check out TheStreet's special offer for Real Money, headlined by Jim Cramer, now!
- The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 15.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- GNTX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign.
- 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 Auto Components industry average. The net income increased by 6.0% when compared to the same quarter one year prior, going from $38.47 million to $40.77 million.
- The gross profit margin for GENTEX CORP is currently lower than what is desirable, coming in at 33.10%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 14.50% is above that of the industry average.
- GNTX'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 29.10%, 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, GNTX is still more expensive than most of the other companies in its industry.
-- Written by a member of TheStreet Ratings Staff