NEW YORK ( TheStreet) -- PMC Commercial (AMEX: PCC) 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, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • PCC's revenue growth has slightly outpaced the industry average of 14.8%. Since the same quarter one year prior, revenues rose by 17.4%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • After a year of stock price fluctuations, the net result is that PCC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 28.3% when compared to the same quarter one year ago, falling from $1.28 million to $0.92 million.
  • 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, PMC COMMERCIAL TRUST underperformed against that of the industry average and is significantly less than that of the S&P 500.

PMC Commercial Trust operates as a real estate investment trust (REIT). It primarily originates loans to small businesses, principally in the limited service hospitality industry, collateralized by first liens on the real estate of the related business. The company has a P/E ratio of 18.9, below the average real estate industry P/E ratio of 21.3 and above the S&P 500 P/E ratio of 17.7. PMC Commercial has a market cap of $87.8 million and is part of the financial sector and real estate industry. Shares are down 3.6% year to date as of the close of trading on Monday.

You can view the full PMC Commercial Ratings Report or get investment ideas from our investment research center.
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