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) -- Mercantile Bank Corporation (Nasdaq: MBWM) 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, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.
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- Powered by its strong earnings growth of 33.33% and other important driving factors, this stock has surged by 119.36% 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 46.8% when compared to the same quarter one year prior, rising from $2.72 million to $3.99 million.
- MBWM, with its decline in revenue, slightly underperformed the industry average of 16.3%. Since the same quarter one year prior, revenues fell by 16.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- MERCANTILE BANK CORP has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MERCANTILE BANK CORP turned its bottom line around by earning $4.06 versus -$1.72 in the prior year. For the next year, the market is expecting a contraction of 67.1% in earnings ($1.34 versus $4.06).
- Net operating cash flow has decreased to $5.03 million or 31.36% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff