NEW YORK ( TheStreet) -- Ruth's Hospitality Group (Nasdaq: RUTH) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and generally poor debt management. Highlights from the ratings report include:
- Compared to its closing price of one year ago, RUTH's share price has jumped by 27.77%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 3.4%. 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, RUTHS HOSPITALITY GROUP INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Hotels, Restaurants & Leisure industry average. The net income has decreased by 12.1% when compared to the same quarter one year ago, dropping from $6.93 million to $6.10 million.
- The gross profit margin for RUTHS HOSPITALITY GROUP INC is rather low; currently it is at 22.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.00% significantly trails the industry average.
-- Written by a member of TheStreet Ratings Staff