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) -- Flextronics International (Nasdaq: FLEX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and generally higher debt management risk.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 15.9% when compared to the same quarter one year prior, going from $129.88 million to $150.55 million.
- FLEXTRONICS INTERNATIONAL has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FLEXTRONICS INTERNATIONAL reported lower earnings of $0.71 versus $0.75 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.71).
- FLEX has underperformed the S&P 500 Index, declining 11.88% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for FLEXTRONICS INTERNATIONAL is currently extremely low, coming in at 5.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.40% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff