NEW YORK ( TheStreet) -- AdCare Health Systems (AMEX: ADK) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally poor debt management. 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 Health Care Providers & Services industry. The net income has significantly decreased by 286.6% when compared to the same quarter one year ago, falling from $0.41 million to -$0.77 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Providers & Services industry and the overall market, ADCARE HEALTH SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Net operating cash flow has significantly increased by 763.55% to $0.78 million when compared to the same quarter last year. In addition, ADCARE HEALTH SYSTEMS INC has also vastly surpassed the industry average cash flow growth rate of 33.32%.
- ADK's very impressive revenue growth greatly exceeded the industry average of 4.3%. Since the same quarter one year prior, revenues leaped by 394.3%. 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.