NEW YORK (TheStreet) -- Government Properties Income (NYSE:GOV) 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 growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 17.9%. Since the same quarter one year prior, revenues rose by 28.6%. 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, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels.
- GOV has underperformed the S&P 500 Index, declining 18.51% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for GOVERNMENT PPTYS INCOME TR is currently lower than what is desirable, coming in at 33.90%. Regardless of GOV's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GOV's net profit margin of 25.90% is significantly lower than the same period one year prior.
-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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