NEW YORK ( TheStreet) -- CNinsure (Nasdaq: CISG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 20.7%. Since the same quarter one year prior, revenues rose by 39.4%. 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.
- CISG has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 11.21, which clearly demonstrates the ability to cover short-term cash needs.
- CNINSURE INC -ADS's earnings per share declined by 6.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CNINSURE INC -ADS increased its bottom line by earning $1.23 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $1.23).
- Looking at the price performance of CISG's shares over the past 12 months, there is not much good news to report: the stock is down 51.97%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 Insurance industry. The net income has decreased by 8.9% when compared to the same quarter one year ago, dropping from $17.56 million to $15.99 million.