NEW YORK ( TheStreet) -- Advocat (Nasdaq: AVCA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.9%. Since the same quarter one year prior, revenues rose by 10.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Health Care Providers & Services industry and the overall market on the basis of return on equity, ADVOCAT INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 32.09%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 950.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Providers & Services industry. The net income has significantly decreased by 496.8% when compared to the same quarter one year ago, falling from $0.22 million to -$0.87 million.
-- Written by a member of TheStreet Ratings Staff