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) -- Gentherm (Nasdaq: THRM) 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 compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.
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- The revenue growth came in higher than the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 12.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.30, which illustrates the ability to avoid short-term cash problems.
- GENTHERM INC reported significant earnings per share improvement 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, GENTHERM INC reported lower earnings of $0.08 versus $0.44 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus $0.08).
- The gross profit margin for GENTHERM INC is currently lower than what is desirable, coming in at 31.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.90% trails that of the industry average.
- THRM has underperformed the S&P 500 Index, declining 9.48% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
-- Written by a member of TheStreet Ratings Staff