NEW YORK ( TheStreet) -- Asia Entertainment & Resources (Nasdaq: AERL) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:
  • The gross profit margin for ASIA ENTERTAINMENT & RES LTD is currently lower than what is desirable, coming in at 29.00%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 38.30% has significantly outperformed against the industry average.
  • After a year of stock price fluctuations, the net result is that AERL'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. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
  • ASIA ENTERTAINMENT & RES LTD has improved earnings per share by 22.7% in the most recent quarter compared to the same quarter a year ago.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 117.8% when compared to the same quarter one year prior, rising from $9.71 million to $21.15 million.

Asia Entertainment & Resources Ltd., through its subsidiaries, engages in the promotion of VIP gaming rooms in casinos in Macau, China. The company has a P/E ratio of three, equal to the average leisure industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Asia Entertainment has a market cap of $232.8 million and is part of the services sector and leisure industry. Shares are down 36.7% year to date as of the close of trading on Friday.

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