NEW YORK (TheStreet) -- China HGS Real Estate (HGSH) - Get ReportHGSH was gaining 69.4% to $5.86 Tuesday after signing its first shanty area rebuilding agreement with the Hantai District government of Hanzhong City.
Under the agreement the company will develop the shanty areas around Liang Zhou Road in the Hantai District. The local government will work with China HGS to implement the reform plan for the area. About $580 million will be invested in the project.
TheStreet Ratings team rates CHINA HGS REAL ESTATE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHINA HGS REAL ESTATE INC (HGSH) 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 robust revenue growth, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HGSH's very impressive revenue growth greatly exceeded the industry average of 10.2%. Since the same quarter one year prior, revenues leaped by 157.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CHINA HGS REAL ESTATE INC reported significant earnings per share improvement 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 two years. During the past fiscal year, CHINA HGS REAL ESTATE INC increased its bottom line by earning $0.46 versus $0.11 in the prior year.
- HGSH's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.13 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for CHINA HGS REAL ESTATE INC is currently lower than what is desirable, coming in at 33.12%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 28.67% has significantly outperformed against the industry average.
- Net operating cash flow has significantly decreased to -$3.65 million or 2084.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: HGSH Ratings Report
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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.