NEW YORK ( TheStreet) -- Grand Canyon Education (Nasdaq: LOPE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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, weak operating cash flow and disappointing return on equity. Highlights from the ratings report include:
- LOPE's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 10.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for GRAND CANYON EDUCATION INC is rather high; currently it is at 59.00%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.80% trails the industry average.
- LOPE's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.71 is somewhat weak and could be cause for future problems.
- Net operating cash flow has decreased to $29.47 million or 41.54% 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.
- LOPE has underperformed the S&P 500 Index, declining 18.93% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.