NEW YORK ( TheStreet) -- ChinaEdu Corporation (Nasdaq: CEDU) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, unimpressive growth in net income and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has significantly decreased to $2.32 million or 73.65% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- In its most recent trading session, CEDU has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for CHINAEDU CORP -ADR is rather high; currently it is at 64.00%. Regardless of CEDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.90% trails the industry average.
- CEDU 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.27, which illustrates the ability to avoid short-term cash problems.
- The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 13.5%. 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.