NEW YORK ( TheStreet) -- Great Wolf Resorts (Nasdaq: WOLF) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally poor debt management and disappointing return on equity. Highlights from the ratings report include:
- 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.
- GREAT WOLF RESORTS INC reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, GREAT WOLF RESORTS INC continued to lose money by earning -$1.66 versus -$1.87 in the prior year. This year, the market expects an improvement in earnings (-$0.83 versus -$1.66).
- The gross profit margin for GREAT WOLF RESORTS INC is rather high; currently it is at 51.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WOLF's net profit margin of 1.80% significantly trails the industry average.
- The debt-to-equity ratio is very high at 3.33 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.37, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, GREAT WOLF RESORTS INC's return on equity significantly trails that of both the industry average and the S&P 500.