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) -- Harman International Industries (NYSE: HAR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, poor profit margins and weak operating cash flow.
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- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Household Durables industry average. The net income increased by 12.8% when compared to the same quarter one year prior, going from $48.37 million to $54.56 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Household Durables industry and the overall market, HARMAN INTERNATIONAL INDS's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- HAR's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 1.00 is somewhat weak and could be cause for future problems.
- The gross profit margin for HARMAN INTERNATIONAL INDS is currently lower than what is desirable, coming in at 30.70%. Regardless of HAR's low profit margin, it has managed to increase from the same period last year.
- Net operating cash flow has declined marginally to -$102.40 million or 0.21% when compared to the same quarter last year. Despite a decrease in cash flow HARMAN INTERNATIONAL INDS is still fairing well by exceeding its industry average cash flow growth rate of -22.23%.
-- Written by a member of TheStreet Ratings Staff