NEW YORK ( TheStreet) -- New Oriental Education & Technology Group I (NYSE: EDU) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and premium valuation. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 16.3%. Since the same quarter one year prior, revenues rose by 38.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- EDU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, EDU has a quick ratio of 2.40, which demonstrates the ability of the company to cover short-term liquidity needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Diversified Consumer Services industry and the overall market on the basis of return on equity, NEW ORIENTAL ED & TECH has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- EDU has underperformed the S&P 500 Index, declining 16.97% 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.