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) -- Embotelladora Andina (NYSE: AKO.B) 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and disappointing return on equity.
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- The revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 35.2%. 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, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AKO.B's debt-to-equity ratio is low, the quick ratio, which is currently 0.50, displays a potential problem in covering short-term cash needs.
- 38.35% is the gross profit margin for EMBOTELLADORA ANDINA SA which we consider to be strong. Regardless of AKO.B's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AKO.B's net profit margin of 4.09% is significantly lower than the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, AKO.B has underperformed the S&P 500 Index, declining 7.69% 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.
- EMBOTELLADORA ANDINA SA's earnings per share declined by 6.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, EMBOTELLADORA ANDINA SA reported lower earnings of $1.37 versus $1.47 in the prior year. For the next year, the market is expecting a contraction of 3.6% in earnings ($1.32 versus $1.37).