NEW YORK ( TheStreet) -- Capital Senior Living Corporation (NYSE: CSU) 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, increase in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and generally poor debt management. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 31.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- CAPITAL SENIOR LIVING CORP reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CAPITAL SENIOR LIVING CORP increased its bottom line by earning $0.16 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus $0.16).
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Health Care Providers & Services industry average. The net income increased by 6.0% when compared to the same quarter one year prior, going from $0.48 million to $0.51 million.
- The debt-to-equity ratio of 1.24 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, CSU's quick ratio is somewhat strong at 1.33, demonstrating the ability to handle short-term liquidity needs.
- The gross profit margin for CAPITAL SENIOR LIVING CORP is rather low; currently it is at 18.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.80% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff