NEW YORK ( TheStreet) -- Town Sports International Holdings (Nasdaq: CLUB) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • The gross profit margin for TOWN SPORTS INTL HOLDINGS is rather low; currently it is at 23.40%. Regardless of CLUB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CLUB's net profit margin of 1.30% is significantly lower than the same period one year prior.
  • Powered by its strong earnings growth of 333.33% and other important driving factors, this stock has surged by 152.17% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • Despite the fact that CLUB's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.64 is low and demonstrates weak liquidity.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 309.4% when compared to the same quarter one year prior, rising from -$0.73 million to $1.53 million.
  • TOWN SPORTS INTL HOLDINGS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TOWN SPORTS INTL HOLDINGS continued to lose money by earning -$0.01 versus -$0.26 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus -$0.01).

Town Sports International Holdings, Inc., together with its subsidiaries, owns and operates fitness clubs in the Northeast and Mid-Atlantic regions of the United States. The company has a P/E ratio of 63.6, below the average leisure industry P/E ratio of 77.8 and above the S&P 500 P/E ratio of 17.7. Town Sports International has a market cap of $159.5 million and is part of the services sector and leisure industry. Shares are up 71.4% year to date as of the close of trading on Thursday.

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