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) -- Colfax Corporation (NYSE: CFX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.
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- CFX's very impressive revenue growth greatly exceeded the industry average of 12.5%. Since the same quarter one year prior, revenues leaped by 477.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.90, 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 1.18, which illustrates the ability to avoid short-term cash problems.
- COLFAX CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COLFAX CORP swung to a loss, reporting -$1.09 versus $0.09 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus -$1.09).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Machinery industry and the overall market, COLFAX CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for COLFAX CORP is currently lower than what is desirable, coming in at 31.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.92% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff