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) -- SPX Corporation (NYSE: SPW) 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 compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and feeble growth in the company's earnings per share.
- The revenue growth came in higher than the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 14.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.33, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $223.00 million or 10.72% when compared to the same quarter last year. Despite an increase in cash flow, SPX CORP's average is still marginally south of the industry average growth rate of 16.14%.
- The gross profit margin for SPX CORP is currently lower than what is desirable, coming in at 29.30%. Regardless of SPW's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SPW's net profit margin of 9.78% compares favorably to the industry average.
- 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 Machinery industry and the overall market, SPX 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