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) -- PowerSecure International (Nasdaq: POWR) 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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- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 35.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- POWR'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. To add to this, POWR has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
- POWERSECURE INTL INC 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, POWERSECURE INTL INC reported lower earnings of $0.17 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.17).
- The gross profit margin for POWERSECURE INTL INC is currently lower than what is desirable, coming in at 30.60%. Regardless of POWR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.63% trails the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Electrical Equipment industry and the overall market, POWERSECURE INTL INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff