NEW YORK ( TheStreet) -- Donegal Group (Nasdaq: DGICA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and poor profit margins.
- ACTIVE STOCK TRADERS: Check out TheStreet's special offer for Real Money, headlined by Jim Cramer, now!
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 263.1% when compared to the same quarter one year prior, rising from $2.21 million to $8.01 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.1%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DONEGAL GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DONEGAL GROUP INC reported lower earnings of $0.02 versus $0.45 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus $0.02).
- Net operating cash flow has significantly decreased to -$0.13 million or 102.06% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, DONEGAL GROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff