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NEW YORK (TheStreet) -- Textainer Group (TGH) - Get Textainer Group Holdings Limited Report has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TEXTAINER GROUP HOLDINGS LTD (TGH) 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 revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
- The gross profit margin for TEXTAINER GROUP HOLDINGS LTD is rather high; currently it is at 52.73%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, TGH's net profit margin of 29.52% significantly outperformed against the industry.
- Net operating cash flow has increased to $104.26 million or 10.06% when compared to the same quarter last year. Despite an increase in cash flow, TEXTAINER GROUP HOLDINGS LTD's cash flow growth rate is still lower than the industry average growth rate of 23.14%.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Trading Companies & Distributors industry average. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from $45.55 million to $42.40 million.
- The debt-to-equity ratio is very high at 2.51 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, TGH maintains a poor quick ratio of 0.83, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: TGH Ratings Report