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) -- Synaptics (Nasdaq: SYNA) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Although SYNA's debt-to-equity ratio of 0.01 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.87, which clearly demonstrates the ability to cover short-term cash needs.
- 47.80% is the gross profit margin for SYNAPTICS INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, SYNA's net profit margin of 8.90% significantly trails the industry average.
- Compared to its closing price of one year ago, SYNA's share price has jumped by 25.55%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- SYNAPTICS INC's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SYNAPTICS INC reported lower earnings of $1.59 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($1.92 versus $1.59).
- SYNA, with its decline in revenue, underperformed when compared the industry average of 23.4%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff