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) -- National Technical Systems (Nasdaq: NTSC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.
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- The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, NTSC has a quick ratio of 1.76, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 52.03% to $2.13 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 31.16%.
- Compared to its closing price of one year ago, NTSC's share price has jumped by 215.88%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Professional Services industry and the overall market, NATIONAL TECHNICAL SYS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Professional Services industry. The net income has significantly decreased by 109.0% when compared to the same quarter one year ago, falling from $1.60 million to -$0.14 million.