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) -- Richardson Electronics (Nasdaq: RELL) 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, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and relatively poor performance when compared with the S&P 500 during the past year.
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- RELL 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 7.74, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 135.91% to $2.00 million when compared to the same quarter last year. In addition, RICHARDSON ELECTRONICS LTD has also vastly surpassed the industry average cash flow growth rate of 12.99%.
- RELL, with its decline in revenue, slightly underperformed the industry average of 7.2%. Since the same quarter one year prior, revenues fell by 12.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 69.8% when compared to the same quarter one year ago, falling from $1.34 million to $0.40 million.
- The gross profit margin for RICHARDSON ELECTRONICS LTD is currently lower than what is desirable, coming in at 30.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.20% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff