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) -- NVE Corporation (Nasdaq: NVEC) 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, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.
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- NVEC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 10.30, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for NVE CORP is currently very high, coming in at 75.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 42.00% significantly outperformed against the industry average.
- NVE CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NVE CORP reported lower earnings of $2.32 versus $2.75 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $2.32).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, NVEC has underperformed the S&P 500 Index, declining 12.00% 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.
- 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. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, NVE CORP's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff