NEW YORK ( TheStreet) -- Centene Corporation (NYSE: CNC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
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- CNC's very impressive revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues leaped by 60.5%. 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.
- Net operating cash flow has significantly increased by 154.35% to $22.20 million when compared to the same quarter last year. In addition, CENTENE CORP has also vastly surpassed the industry average cash flow growth rate of 68.24%.
- The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Health Care Providers & Services industry and the overall market, CENTENE CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for CENTENE CORP is currently extremely low, coming in at 7.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.70% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff