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) -- Aerovironment Incorporated (Nasdaq: AVAV) 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- AVAV 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 4.87, which clearly demonstrates the ability to cover short-term cash needs.
- 46.90% is the gross profit margin for AEROVIRONMENT INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.21% is above that of the industry average.
- The revenue fell significantly faster than the industry average of 6.6%. Since the same quarter one year prior, revenues fell by 34.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.79%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 34.61% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, AVAV is still more expensive than most of the other companies in its industry.
- 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. In comparison to the other companies in the Aerospace & Defense industry and the overall market, AEROVIRONMENT INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff