NEW YORK ( TheStreet) -- Covenant Transportation Group (Nasdaq: CVTI) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 Road & Rail industry. The net income has significantly decreased by 695.2% when compared to the same quarter one year ago, falling from $1.88 million to -$11.21 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Road & Rail industry and the overall market, COVENANT TRANSPORTATION GRP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for COVENANT TRANSPORTATION GRP is currently extremely low, coming in at 8.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -6.90% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 62.11%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 684.61% compared to 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.
  • COVENANT TRANSPORTATION GRP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, COVENANT TRANSPORTATION GRP turned its bottom line around by earning $0.23 versus -$1.76 in the prior year. For the next year, the market is expecting a contraction of 160.9% in earnings (-$0.14 versus $0.23).

Covenant Transportation Group, Inc., together with its subsidiaries, offers truckload transportation and brokerage services in the continental United States. It provides long haul, dedicated, regional solo-driver, and regional temperature-controlled services. The company has a P/E ratio of 28.1, equal to the average transportation industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Covenant Transportation Group has a market cap of $41.7 million and is part of the services sector and transportation industry. Shares are down 67.7% year to date as of the close of trading on Thursday.

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