NEW YORK ( TheStreet) -- Dolan (NYSE: DM) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and disappointing return on equity.

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 against the S&P 500 and did not exceed that of the Professional Services industry. The net income has significantly decreased by 62.0% when compared to the same quarter one year ago, falling from $9.16 million to $3.48 million.
  • Net operating cash flow has significantly decreased to $7.58 million or 64.17% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • DM, with its decline in revenue, underperformed when compared the industry average of 9.8%. Since the same quarter one year prior, revenues slightly dropped by 5.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for DOLAN CO is rather high; currently it is at 56.10%. Regardless of DM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DM's net profit margin of 4.80% compares favorably to the industry average.

The Dolan Company, together with its subsidiaries, provides professional services and business information services to legal, financial, and real estate sectors in the United States. The company has a P/E ratio of 11.8, above the average media industry P/E ratio of 11.3 and below the S&P 500 P/E ratio of 17.7. Dolan has a market cap of $316.1 million and is part of the services sector and media industry. Shares are down 24.9% year to date as of the close of trading on Wednesday.

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