NEW YORK ( TheStreet) -- Biglari Holdings (NYSE: BH) 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 poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • BIGLARI HOLDINGS INC has improved earnings per share by 30.1% 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, BIGLARI HOLDINGS INC increased its bottom line by earning $25.88 versus $20.10 in the prior year. This year, the market expects an improvement in earnings ($29.15 versus $25.88).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income increased by 28.3% when compared to the same quarter one year prior, rising from $8.40 million to $10.78 million.
  • BH's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that BH's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.90 is high and demonstrates strong liquidity.
  • BH has underperformed the S&P 500 Index, declining 15.56% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for BIGLARI HOLDINGS INC is currently lower than what is desirable, coming in at 26.80%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, BH's net profit margin of 6.40% is significantly lower than the same period one year prior.

Biglari Holdings Inc., through its subsidiaries, engages in the ownership, development, operation, and franchising of restaurants in the United States. The company has a P/E ratio of 14, below the average leisure industry P/E ratio of 15.1 and below the S&P 500 P/E ratio of 17.7. Biglari has a market cap of $519.3 million and is part of the services sector and leisure industry. Shares are down 11.7% year to date as of the close of trading on Thursday.

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