NEW YORK ( TheStreet) -- Interval Leisure Group (Nasdaq: IILG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and disappointing return on equity.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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.
  • Net operating cash flow has slightly increased to $27.35 million or 2.25% when compared to the same quarter last year. Despite an increase in cash flow, INTERVAL LEISURE GROUP's cash flow growth rate is still lower than the industry average growth rate of 16.82%.
  • The share price of INTERVAL LEISURE GROUP has not done very well: it is down 8.44% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 33.7% when compared to the same quarter one year ago, falling from $11.32 million to $7.50 million.

Interval Leisure Group, Inc., together with its subsidiaries, provides membership and leisure services to the vacation industry worldwide. The company operates through two segments, Interval and Aston. The company has a P/E ratio of 18, below the average diversified services industry P/E ratio of 18.3 and above the S&P 500 P/E ratio of 17.7. Interval Leisure Group has a market cap of $654.4 million and is part of the services sector and diversified services industry. Shares are down 30% year to date as of the close of trading on Monday.

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