The firm said it raised its rating on the real estate investment trust based on a variety of factors, including a deleveraging opportunity created from the sale of its $22 million share of interest in Select Income REIT (SIR), a return in dedicated interest based on the company's new management strategy, and a recent sell off in shares which created an "attractive entry point," Benzinga.com reports.
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"We rate COMMONWEALTH REIT (CWH) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
Separately, TheStreet Ratings team rates COMMONWEALTH REIT as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
- Compared to its price level of one year ago, CWH is up 10.11% to its most recent closing price of 26.35. Looking ahead, our view is that this company's fundamentals should not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- COMMONWEALTH REIT has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, COMMONWEALTH REIT increased its bottom line by earning $0.13 versus $0.09 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus $0.13).
- The gross profit margin for COMMONWEALTH REIT is currently lower than what is desirable, coming in at 29.35%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 8.94% significantly trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Real Estate Investment Trusts (REITs) industry. The net income has decreased by 20.3% when compared to the same quarter one year ago, dropping from $25.67 million to $20.45 million.
- You can view the full analysis from the report here: CWH Ratings Report
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