Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model NEW YORK ( TheStreet) -- Summit Hotel Properties (NYSE: INN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins and weak operating cash flow.
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- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 118.4% when compared to the same quarter one year ago, falling from $0.44 million to -$0.08 million.
- The gross profit margin for SUMMIT HOTEL PROPERTIES INC is currently lower than what is desirable, coming in at 30.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.20% is significantly below that of the industry average.
- Net operating cash flow has declined marginally to $10.23 million or 4.54% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, SUMMIT HOTEL PROPERTIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
-- Written by a member of TheStreet Ratings Staff