NEW YORK ( TheStreet) -- Longwei Petroleum Investment Holding Limite (AMEX: LPH) 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 compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- LPH's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 31.13%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for LONGWEI PETROLEUM INVT HLDG is rather low; currently it is at 20.00%. Regardless of LPH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, LPH's net profit margin of 11.80% compares favorably to the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, LONGWEI PETROLEUM INVT HLDG has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- LPH has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, LPH has a quick ratio of 2.32, which demonstrates the ability of the company to cover short-term liquidity needs.
- LPH's very impressive revenue growth greatly exceeded the industry average of 11.8%. Since the same quarter one year prior, revenues leaped by 68.7%. Growth in the company's revenue appears to have helped boost the earnings per share.