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) -- Rush (Nasdaq: RUSHA) 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 and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
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- The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 26.7%. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- RUSH ENTERPRISES INC's earnings per share declined by 11.8% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, RUSH ENTERPRISES INC reported lower earnings of $1.22 versus $1.58 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.22).
- 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 Trading Companies & Distributors industry and the overall market, RUSH ENTERPRISES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for RUSH ENTERPRISES INC is rather low; currently it is at 17.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.25% trails that of the industry average.