NEW YORK ( TheStreet) -- Celadon Group (NYSE: CGI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- CELADON 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CELADON GROUP INC increased its bottom line by earning $0.66 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.66).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Road & Rail industry. The net income increased by 101.1% when compared to the same quarter one year prior, rising from $2.73 million to $5.49 million.
- Net operating cash flow has decreased to $10.22 million or 14.61% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- CGI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.72%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, CGI is still more expensive than most of the other companies in its industry.