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) -- Ennis (NYSE: EBF) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and poor profit margins.
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- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Services & Supplies industry average. The net income increased by 51.5% when compared to the same quarter one year prior, rising from $6.17 million to $9.35 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 5.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ENNIS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENNIS INC reported lower earnings of $0.95 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.49 versus $0.95).
- In its most recent trading session, EBF has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has significantly decreased to -$1.53 million or 113.59% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.