NEW YORK ( TheStreet) -- Apollo Group (Nasdaq: APOL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. 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:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Consumer Services industry. The net income increased by 199.8% when compared to the same quarter one year prior, rising from -$64.04 million to $63.88 million.
- Although APOL's debt-to-equity ratio of 0.12 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for APOLLO GROUP INC is rather high; currently it is at 55.70%. Regardless of APOL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.60% trails the industry average.
- APOLLO GROUP 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, APOLLO GROUP INC increased its bottom line by earning $4.02 versus $3.69 in the prior year. For the next year, the market is expecting a contraction of 17.5% in earnings ($3.32 versus $4.02).
- APOL has underperformed the S&P 500 Index, declining 9.13% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
-- Written by a member of TheStreet Ratings Staff