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) -- Layne Christensen Company (Nasdaq: LAYN) has been upgraded by TheStreet Ratings from sell 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 increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
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- The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.
- LAYNE CHRISTENSEN CO reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LAYNE CHRISTENSEN CO swung to a loss, reporting -$2.94 versus $1.54 in the prior year. This year, the market expects an improvement in earnings ($1.14 versus -$2.94).
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Construction & Engineering industry and the overall market, LAYNE CHRISTENSEN CO's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Construction & Engineering industry average, but is greater than that of the S&P 500. The net income has decreased by 3.2% when compared to the same quarter one year ago, dropping from $8.75 million to $8.48 million.
-- Written by a member of TheStreet Ratings Staff