NEW YORK ( TheStreet) -- Assisted Living Concepts (NYSE: ALC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, compelling growth in net income and revenue growth. 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 ASSISTED LIVING CONCEPTS INC is currently lower than what is desirable, coming in at 32.50%. Regardless of ALC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ALC's net profit margin of 8.60% compares favorably to the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.37 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Health Care Providers & Services industry average. The net income increased by 38.7% when compared to the same quarter one year prior, rising from $3.61 million to $5.01 million.
  • ASSISTED LIVING CONCEPTS INC has improved earnings per share by 38.7% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ASSISTED LIVING CONCEPTS INC increased its bottom line by earning $0.71 versus $0.05 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus $0.71).

Assisted Living Concepts, Inc. operates senior living residences in the United States. The company has a P/E ratio of 21.8, above the average health services industry P/E ratio of 21.6 and above the S&P 500 P/E ratio of 17.7. Assisted Living Concepts has a market cap of $331 million and is part of the health care sector and health services industry. Shares are up 1.1% year to date as of the close of trading on Monday.

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