Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Fonar Corporation (Nasdaq: FONR) 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, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally higher debt management risk.
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- The revenue growth came in higher than the industry average of 1.3%. Since the same quarter one year prior, revenues rose by 22.3%. 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.
- Compared to its closing price of one year ago, FONR's share price has jumped by 71.88%, exceeding the performance of the broader market during that same time frame. 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.
- The gross profit margin for FONAR CORP is rather high; currently it is at 57.54%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.23% trails the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the Health Care Equipment & Supplies industry average, but is less than that of the S&P 500. The net income has decreased by 16.8% when compared to the same quarter one year ago, dropping from $1.29 million to $1.08 million.
- Currently the debt-to-equity ratio of 1.72 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, FONR's quick ratio is somewhat strong at 1.49, demonstrating the ability to handle short-term liquidity needs.