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 growth in earnings per share, revenue growth and good cash flow from operations. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.
Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RAILAMERICA INC has improved earnings per share by 13.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, RAILAMERICA INC turned its bottom line around by earning $0.35 versus -$0.04 in the prior year. This year, the market expects an improvement in earnings ($0.78 versus $0.35).
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Road & Rail industry average. The net income increased by 13.7% when compared to the same quarter one year prior, going from $7.97 million to $9.06 million.
- The gross profit margin for RAILAMERICA INC is currently lower than what is desirable, coming in at 29.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.50% significantly trails the industry average.
RailAmerica, Inc. engages in the ownership and operation of short line and regional freight railroads in North America. The company has a P/E ratio of 17.8, below the average transportation industry P/E ratio of 18.3 and equal to the S&P 500 P/E ratio of 17.7. RailAmerica has a market cap of $696 million and is part of the
industry. Shares are up 1.7% year to date as of the close of trading on Friday.
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