Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
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 solid stock price performance, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.
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Highlights from the ratings report include:
- Compared to its closing price of one year ago, FAC's share price has jumped by 96.29%, exceeding the performance of the broader market during that same time frame. Although FAC had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 5.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, FIRST ACCEPTANCE CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The gross profit margin for FIRST ACCEPTANCE CORP is currently extremely low, coming in at 2.01%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.81% trails that of the industry average.
- Net operating cash flow has decreased to $6.83 million or 14.24% 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.
First Acceptance Corporation, through its subsidiaries, is engaged in selling, servicing, and underwriting non-standard personal automobile insurance policies and related products in the United States. The company operates in two segments, Insurance, and Real Estate and Corporate. First Acceptance has a market cap of $108.6 million and is part of the financial sector and insurance industry. Shares are up 13.7% year to date as of the close of trading on Tuesday.
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