Rating Change #9
ChinaEdu Corporation (CEDU) 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 weak operating cash flow.
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Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 29.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CEDU 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 2.74, which clearly demonstrates the ability to cover short-term cash needs.
- CHINAEDU CORP -ADR 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, CHINAEDU CORP -ADR reported lower earnings of $0.16 versus $0.34 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.16).
- 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. Compared to other companies in the Diversified Consumer Services industry and the overall market, CHINAEDU CORP -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$5.18 million or 353.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.