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) -- Cott (NYSE: COT) 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 and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
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- COT, with its decline in revenue, slightly underperformed the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- COT's debt-to-equity ratio of 0.98 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.38 is sturdy.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Beverages industry average. The net income has decreased by 10.5% when compared to the same quarter one year ago, dropping from $16.20 million to $14.50 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Beverages industry and the overall market, COTT CORP QUE's return on equity is significantly below that of the industry average and is below that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff