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) -- ScanSource (Nasdaq: SCSC) 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 and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
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- SCSC's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.2%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for SCANSOURCE INC is currently extremely low, coming in at 10.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.18% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$12.39 million or 214.14% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet Ratings Staff