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) -- L.S. Starrett Company (NYSE: SCX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
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- SCX's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SCX has a quick ratio of 2.20, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has slightly increased to $7.33 million or 4.31% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -36.67%.
- SCX, with its decline in revenue, underperformed when compared the industry average of 10.2%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Machinery industry and the overall market, STARRETT (L.S.) CO's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for STARRETT (L.S.) CO is rather low; currently it is at 22.20%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -6.60% is significantly below that of the industry average.
-- Written by a member of TheStreet Ratings Staff