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PRGX Global Inc. Stock Downgraded (PRGX)

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) -- PRGX Global (Nasdaq: PRGX) has been downgraded by TheStreet Ratings from buy to hold. 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 increase in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 10.7%. Since the same quarter one year prior, revenues slightly increased by 0.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PRGX's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.55%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.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.
  • PRGX GLOBAL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, PRGX GLOBAL INC reported lower earnings of $0.12 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.22 versus $0.12).
  • 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 IT Services industry and the overall market, PRGX GLOBAL INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
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PRGX Global, Inc., together with its subsidiaries, provides recovery audit, healthcare claims recovery audit, and analytics and advisory services. The company has a P/E ratio of 33.4, above the S&P 500 P/E ratio of 17.7. PRGX Global has a market cap of $169.5 million and is part of the services sector and diversified services industry. Shares are up 12.1% year to date as of the close of trading on Monday.

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

-- Written by a member of TheStreet Ratings Staff

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