NEW YORK ( TheStreet) -- Skilled Healthcare Group (NYSE: SKH) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally weak debt management and poor profit margins.

Highlights from the ratings report include:
  • SKILLED HEALTHCARE GROUP INC 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, SKILLED HEALTHCARE GROUP INC continued to lose money by earning -$0.03 versus -$3.60 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus -$0.03).
  • This stock has increased by 76.83% 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Health Care Providers & Services industry and the overall market, SKILLED HEALTHCARE GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SKILLED HEALTHCARE GROUP INC is rather low; currently it is at 18.40%. Regardless of SKH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SKH's net profit margin of 4.90% compares favorably to the industry average.
  • Currently the debt-to-equity ratio of 1.64 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated.

Skilled Healthcare Group, Inc., through its subsidiaries, operates skilled nursing facilities, assisted living facilities, hospices, home health providers, and a rehabilitation therapy business. The company has a P/E ratio of 23.6, equal to the average health services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Skilled Healthcare Group has a market cap of $104.4 million and is part of the health care sector and health services industry. Shares are down 49% year to date as of the close of trading on Monday.

You can view the full Skilled Healthcare Group Ratings Report or get investment ideas from our investment research center.
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