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) -- Canon (NYSE: CAJ) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.
- 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.
- CAJ's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CAJ has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for CANON INC is rather high; currently it is at 52.10%. Regardless of CAJ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CAJ's net profit margin of 6.41% compares favorably to the industry average.
- CAJ, with its decline in revenue, slightly underperformed the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 38.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CANON INC's earnings per share declined by 35.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CANON INC reported lower earnings of $2.21 versus $2.66 in the prior year. For the next year, the market is expecting a contraction of 7.3% in earnings ($2.05 versus $2.21).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Office Electronics industry. The net income has significantly decreased by 38.1% when compared to the same quarter one year ago, falling from $800.06 million to $495.01 million.
-- Written by a member of TheStreet Ratings Staff