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"We rate KENNAMETAL INC (KMT) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its 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 analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 12.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
- The net income growth from the same quarter one year ago has exceeded that of the Machinery industry average, but is less than that of the S&P 500. The net income increased by 4.4% when compared to the same quarter one year prior, going from $37.84 million to $39.49 million.
- 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 Machinery industry and the overall market, KENNAMETAL 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 KENNAMETAL INC is currently lower than what is desirable, coming in at 30.37%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.68% trails that of the industry average.
- You can view the full analysis from the report here: KMT Ratings Report