NEW YORK ( TheStreet) -- AdCare Health Systems (AMEX: ADK) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- ADK's very impressive revenue growth greatly exceeded the industry average of 12.3%. Since the same quarter one year prior, revenues leaped by 207.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The debt-to-equity ratio is very high at 5.47 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, ADK maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, ADCARE HEALTH SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.