Innovative Solutions And Support Inc Stock Downgraded (ISSC)

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) -- Innovative Solutions and Support (Nasdaq: ISSC) 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, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 20.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ISSC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.10, which clearly demonstrates the ability to cover short-term cash needs.
  • INNOVATIVE SOLTNS & SUPP 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, INNOVATIVE SOLTNS & SUPP INC reported lower earnings of $0.12 versus $0.19 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus $0.12).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Aerospace & Defense industry and the overall market, INNOVATIVE SOLTNS & SUPP 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 INNOVATIVE SOLTNS & SUPP INC is currently lower than what is desirable, coming in at 29.90%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 4.69% trails that of the industry average.

Innovative Solutions and Support, Inc., a systems integrator, designs, manufactures, sells, and services flight guidance and cockpit display systems. Innovative Solutions and Support has a market cap of $95.1 million and is part of the industrial goods sector and aerospace/defense industry. Shares are down 23.2% year to date as of the close of trading on Monday.

You can view the full Innovative Solutions and Support Ratings Report or get investment ideas from our investment research center.

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