NEW YORK ( TheStreet) -- CoStar Group (Nasdaq: CSGP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and disappointing return on equity. Highlights from the ratings report include:
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Professional Services industry and the overall market on the basis of return on equity, COSTAR GROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 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 Professional Services industry. The net income has decreased by 18.9% when compared to the same quarter one year ago, dropping from $3.25 million to $2.64 million.
- The gross profit margin for COSTAR GROUP INC is rather high; currently it is at 63.10%. Regardless of CSGP'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 4.20% trails the industry average.
- Despite its growing revenue, the company underperformed as compared with the industry average of 17.7%. Since the same quarter one year prior, revenues rose by 11.3%. 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.
- Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 9.39 is very high and demonstrates very strong liquidity.