NEW YORK ( TheStreet) -- 7 Days Group Holdings (NYSE: SVN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has declined marginally to $14.90 million or 0.03% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, seven DAYS GROUP HLDGS LTD -ADR has marginally lower results.
- The gross profit margin for seven DAYS GROUP HLDGS LTD -ADR is currently lower than what is desirable, coming in at 27.80%. Regardless of SVN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SVN's net profit margin of 3.50% is significantly lower than the same period one year prior.
- SVN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 53.16%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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 return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, seven DAYS GROUP HLDGS LTD -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- SVN's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that SVN's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
-- Written by a member of TheStreet Ratings Staff