NEW YORK ( TheStreet) -- Government Properties Income (NYSE: GOV) 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 compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 17.4%. Since the same quarter one year prior, revenues rose by 40.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels.
- GOVERNMENT PPTYS INCOME TR 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GOVERNMENT PPTYS INCOME TR increased its bottom line by earning $1.06 versus $0.83 in the prior year. For the next year, the market is expecting a contraction of 3.8% in earnings ($1.02 versus $1.06).
- The gross profit margin for GOVERNMENT PPTYS INCOME TR is currently lower than what is desirable, coming in at 32.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 25.60% trails that of the industry average.
- Net operating cash flow has decreased to $12.13 million or 21.38% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff