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) -- Iridex Corporation (Nasdaq: IRIX) 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 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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- IRIX 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 3.22, which clearly demonstrates the ability to cover short-term cash needs.
- 49.60% is the gross profit margin for IRIDEX CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -9.50% is in-line with the industry average.
- IRIX, with its decline in revenue, slightly underperformed the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 313.5% when compared to the same quarter one year ago, falling from $0.35 million to -$0.75 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. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, IRIDEX CORP's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff