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NEW YORK (TheStreet) -- Heritage-Crystal Clean (HCCI) 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 HERITAGE-CRYSTAL CLEAN INC (HCCI) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HCCI's revenue growth has slightly outpaced the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 15.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HCCI's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, HCCI has a quick ratio of 1.52, which demonstrates the ability of the company to cover short-term liquidity needs.
- HERITAGE-CRYSTAL CLEAN INC 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, HERITAGE-CRYSTAL CLEAN INC increased its bottom line by earning $0.25 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 136.0% in earnings (-$0.09 versus $0.25).
- The gross profit margin for HERITAGE-CRYSTAL CLEAN INC is rather low; currently it is at 19.67%. Regardless of HCCI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.09% trails the industry average.
- HCCI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 45.58%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full analysis from the report here: HCCI Ratings Report