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) -- Ritchie Bros. Auctioneers (NYSE: RBA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. 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.
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- The revenue growth came in higher than the industry average of 10.2%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems.
- RITCHIE BROS AUCTIONEERS INC's earnings per share declined by 23.5% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, RITCHIE BROS AUCTIONEERS INC increased its bottom line by earning $0.75 versus $0.72 in the prior year.
- 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. Compared to other companies in the Commercial Services & Supplies industry and the overall market on the basis of return on equity, RITCHIE BROS AUCTIONEERS INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RBA has underperformed the S&P 500 Index, declining 6.63% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
-- Written by a member of TheStreet Ratings Staff