NEW YORK (
) has been downgraded by TheStreet Ratings from buy 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, attractive valuation levels 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 a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- CECO's debt-to-equity ratio is very low at 0.00 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 1.24, which illustrates the ability to avoid short-term cash problems.
- CAREER EDUCATION CORP's earnings per share declined by 9.8% 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, CAREER EDUCATION CORP increased its bottom line by earning $2.05 versus $1.74 in the prior year. This year, the market expects an improvement in earnings ($2.41 versus $2.05).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CECO has underperformed the S&P 500 Index, declining 19.25% 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.
- 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 Diversified Consumer Services industry. The net income has decreased by 13.9% when compared to the same quarter one year ago, dropping from $64.32 million to $55.35 million.
Career Education Corporation, through its subsidiaries, provides educational services primarily in the United States. The company has a P/E ratio of 7.6, above the average diversified services industry P/E ratio of 6.8 and below the S&P 500 P/E ratio of 17.7. Career has a market cap of $1.1 billion and is part of the
industry. Shares are down 28.8% year to date as of the close of trading on Monday.
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