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NEW YORK (TheStreet) -- Motorcar Parts of America (MPAA) has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate MOTORCAR PARTS OF AMER INC (MPAA) 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MPAA's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 7.0%. 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.
- The current debt-to-equity ratio, 0.46, 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 1.00, which illustrates the ability to avoid short-term cash problems.
- Compared to its closing price of one year ago, MPAA's share price has jumped by 141.61%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- 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 Auto Components industry and the overall market, MOTORCAR PARTS OF AMER 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 MOTORCAR PARTS OF AMER INC is currently lower than what is desirable, coming in at 26.87%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.08% trails that of the industry average.
- You can view the full analysis from the report here: MPAA Ratings Report