NEW YORK ( TheStreet) -- Forestar Group (NYSE: FOR) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Management & Development industry. The net income increased by 308.3% when compared to the same quarter one year prior, rising from $8.92 million to $36.43 million.
- FOR's revenue growth trails the industry average of 26.6%. Since the same quarter one year prior, revenues slightly increased by 9.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- FORESTAR GROUP INC reported significant earnings per share improvement 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, FORESTAR GROUP INC reported lower earnings of $0.15 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($0.78 versus $0.15).
- The gross profit margin for FORESTAR GROUP INC is currently extremely low, coming in at 12.50%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 138.80% has significantly outperformed against the industry average.
- FOR has underperformed the S&P 500 Index, declining 18.92% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.