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) -- Elizabeth Arden (Nasdaq: RDEN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, 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, deteriorating net income and disappointing return on equity.
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- Net operating cash flow has increased to $145.89 million or 11.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -4.96%.
- The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
- 48.32% is the gross profit margin for ELIZABETH ARDEN INC which we consider to be strong. Regardless of RDEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.35% trails the industry average.
- Looking at the price performance of RDEN's shares over the past 12 months, there is not much good news to report: the stock is down 38.81%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, RDEN is still more expensive than most of the other companies in its industry.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Personal Products industry and the overall market, ELIZABETH ARDEN INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.