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) -- Nam Tai Electronics (NYSE: NTE) 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.
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- NTE's very impressive revenue growth greatly exceeded the industry average of 1.5%. Since the same quarter one year prior, revenues leaped by 102.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NTE's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NTE has a quick ratio of 1.95, which demonstrates the ability of the company to cover short-term liquidity needs.
- NAM TAI ELECTRONIC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NAM TAI ELECTRONIC turned its bottom line around by earning $1.53 versus -$0.01 in the prior year. For the next year, the market is expecting a contraction of 79.7% in earnings ($0.31 versus $1.53).
- The gross profit margin for NAM TAI ELECTRONIC is currently extremely low, coming in at 9.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.80% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$4.41 million or 325.97% 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