Home Properties Inc. Stock Downgraded (HME)

Editor's Note: 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

NEW YORK (TheStreet) -- Home Properties (NYSE:HME) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:

• HOME PROPERTIES INC has improved earnings per share by 40.0% 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HOME PROPERTIES INC increased its bottom line by earning $0.88 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus $0.88).
• The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 67.5% when compared to the same quarter one year prior, rising from $8.20 million to $13.73 million.
• Net operating cash flow has increased to $71.73 million or 45.92% when compared to the same quarter last year. Despite an increase in cash flow, HOME PROPERTIES INC's cash flow growth rate is still lower than the industry average growth rate of 60.27%.
• In its most recent trading session, HME has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
• The gross profit margin for HOME PROPERTIES INC is currently lower than what is desirable, coming in at 29.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.50% significantly trails the industry average.

Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 58.6, equal to the average real estate industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Home has a market cap of $3.19 billion and is part of the financial sector and real estate industry. Shares are up 10.9% year to date as of the close of trading on Tuesday.

You can view the full Home Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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For more information on Home Properties Inc. click any of the following:

• Home Properties Inc. Stock Price

• Home Properties Inc. Analyst Ratings

• Home Properties Inc. Key Stats & Profile

• Home Properties Inc. Earnings

• Home Properties Inc. Ratio Comparison

• Home Properties Inc. Growth Rates

• Home Properties Inc. Balance Sheet

• Home Properties Inc. Cash Flow

• Home Properties Inc. Income Statement