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) -- Hutchinson Technology (Nasdaq: HTCH) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.
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- Powered by its strong earnings growth of 121.87% and other important driving factors, this stock has surged by 195.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- HUTCHINSON TECHNOLOGY INC 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HUTCHINSON TECHNOLOGY INC continued to lose money by earning -$2.06 versus -$2.39 in the prior year. This year, the market expects an improvement in earnings (-$0.71 versus -$2.06).
- HTCH's debt-to-equity ratio of 0.77 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that HTCH's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.01 is high and demonstrates strong liquidity.
- The gross profit margin for HUTCHINSON TECHNOLOGY INC is currently lower than what is desirable, coming in at 29.90%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, HTCH's net profit margin of 3.06% is significantly lower than the industry average.
- Net operating cash flow has significantly decreased to $3.72 million or 66.30% 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