NEW YORK (

TheStreet

)

-- China-biotics

(Nasdaq:

CHBT

) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Net operating cash flow has decreased to $1.61 million or 43.03% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • CHBT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 52.83%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The net income growth from the same quarter one year ago has exceeded that of the Personal Products industry average, but is less than that of the S&P 500. The net income increased by 26.6% when compared to the same quarter one year prior, rising from $10.48 million to $13.26 million.
  • CHBT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.05, which clearly demonstrates the ability to cover short-term cash needs.
  • The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 39.0%. Growth in the company's revenue appears to have helped boost the earnings per share.

China-Biotics, Inc. engages in the research, development, production, marketing, and distribution of probiotics products in the People's Republic of China. Its products contain live microbial food supplements, which beneficially affect the host by improving its intestinal microbial balance. The company has a P/E ratio of seven, equal to the average drugs industry P/E ratio and below the S&P 500 P/E ratio of 15.9. China-biotics has a market cap of $199.8 million and is part of the

TheStreet Recommends

health care

sector and

drugs

industry. Shares are down 45.5% year to date as of the close of trading on Wednesday.

You can view the full

China-biotics Ratings Report

or get investment ideas from our

investment research center

.

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