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) -- Sunrise Senior Living (NYSE: SRZ) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and poor profit margins.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 650.4% when compared to the same quarter one year prior, rising from $1.28 million to $9.59 million.
- SRZ's revenue growth trails the industry average of 26.1%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SUNRISE SENIOR LIVING 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, SUNRISE SENIOR LIVING INC swung to a loss, reporting -$0.40 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus -$0.40).
- The debt-to-equity ratio is very high at 4.62 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, SRZ has a quick ratio of 0.62, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Health Care Providers & Services industry and the overall market, SUNRISE SENIOR LIVING INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff