NEW YORK ( TheStreet) -- Asia Entertainment & Resources (Nasdaq: AERL) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, ASIA ENTERTAINMENT & RES LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- AERL's very impressive revenue growth greatly exceeded the industry average of 14.2%. Since the same quarter one year prior, revenues leaped by 160.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- AERL's debt-to-equity ratio of 0.85 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.80 is very high and demonstrates very strong liquidity.
- The gross profit margin for ASIA ENTERTAINMENT & RES LTD is currently lower than what is desirable, coming in at 28.60%. Regardless of AERL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AERL's net profit margin of 36.10% significantly outperformed against the industry.
- AERL's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 45.90%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.