NEW YORK ( TheStreet) -- China Information Technology (Nasdaq: CNIT) 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 attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the IT Services industry. The net income has decreased by 7.4% when compared to the same quarter one year ago, dropping from $8.81 million to $8.16 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the IT Services industry and the overall market on the basis of return on equity, CHINA INFORMATION TECHNOLOGY has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • CHINA INFORMATION TECHNOLOGY's earnings per share declined by 5.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CHINA INFORMATION TECHNOLOGY increased its bottom line by earning $0.67 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($0.79 versus $0.67).
  • CNIT's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
  • CNIT's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 94.0%. 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.

China Information Technology, Inc. specializes in Geographic Information System (GIS), digital public security, and hospital information systems in China. The company has a P/E ratio of 4.8, equal to the average computer software & services industry P/E ratio and below the S&P 500 P/E ratio of 16. China Information Technology has a market cap of $164.2 million and is part of the technology sector and computer software & services industry. Shares are down 40.1% year to date as of the close of trading on Wednesday.

You can view the full China Information Technology Ratings Report or get investment ideas from our investment research center.
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