Rating Change #6
Red Lion Hotels Corporation (RLH) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.
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Highlights from the ratings report include:
- 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 Hotels, Restaurants & Leisure industry and the overall market, RED LION HOTELS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- RLH has underperformed the S&P 500 Index, declining 6.80% 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.
- RLH, with its decline in revenue, slightly underperformed the industry average of 2.7%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.28 is very weak and demonstrates a lack of ability to pay short-term obligations.
- RED LION HOTELS CORP 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, RED LION HOTELS CORP reported poor results of -$0.54 versus -$0.30 in the prior year. This year, the market expects an improvement in earnings (-$0.15 versus -$0.54).
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