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) -- iRobot Corporation (Nasdaq: IRBT) 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and disappointing return on equity.
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- The revenue growth greatly exceeded the industry average of 27.1%. Since the same quarter one year prior, revenues slightly increased by 4.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- IRBT 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 3.59, which clearly demonstrates the ability to cover short-term cash needs.
- IROBOT CORP has improved earnings per share by 8.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, IROBOT CORP increased its bottom line by earning $1.44 versus $0.97 in the prior year. For the next year, the market is expecting a contraction of 66.0% in earnings ($0.49 versus $1.44).
- 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. Compared to other companies in the Household Durables industry and the overall market on the basis of return on equity, IROBOT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has significantly decreased to $11.80 million or 52.74% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff