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) -- Honda Motor (NYSE: HMC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins.
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- HMC's revenue growth has slightly outpaced the industry average of 4.7%. Since the same quarter one year prior, revenues rose by 13.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- HONDA MOTOR CO LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HONDA MOTOR CO LTD increased its bottom line by earning $2.17 versus $1.41 in the prior year. This year, the market expects an improvement in earnings ($3.34 versus $2.17).
- Even though the current debt-to-equity ratio is 1.04, it is still below the industry average, suggesting that this level of debt is acceptable within the Automobiles industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.84 is weak.
- Net operating cash flow has decreased to $1,438.91 million or 25.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- HMC has underperformed the S&P 500 Index, declining 14.48% 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.