Rating Change #3
Lincoln Educational Services Corporation (LINC) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
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Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.9%. Since the same quarter one year prior, revenues fell by 11.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for LINCOLN EDUCATIONAL SERVICES is rather high; currently it is at 60.50%. Regardless of LINC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LINC's net profit margin of -11.65% significantly underperformed when compared to the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Consumer Services industry and the overall market, LINCOLN EDUCATIONAL SERVICES's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 293.2% when compared to the same quarter one year ago, falling from $6.18 million to -$11.94 million.
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