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) -- Iridex Corporation (Nasdaq: IRIX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.
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- The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
- IRIX 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. Along with this, the company maintains a quick ratio of 3.35, which clearly demonstrates the ability to cover short-term cash needs.
- 49.80% is the gross profit margin for IRIDEX CORP 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, IRIX's net profit margin of 4.00% significantly trails the industry average.
- IRIDEX CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, IRIDEX CORP reported lower earnings of $0.21 versus $0.30 in the prior year. For the next year, the market is expecting a contraction of 95.2% in earnings ($0.01 versus $0.21).
- 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 Health Care Equipment & Supplies industry. The net income has significantly decreased by 63.0% when compared to the same quarter one year ago, falling from $0.91 million to $0.34 million.
-- Written by a member of TheStreet Ratings Staff