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) -- Emeritus Corportion (NYSE: ESC) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
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- Compared to its closing price of one year ago, ESC's share price has jumped by 28.41%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- ESC's revenue growth trails the industry average of 26.1%. Since the same quarter one year prior, revenues slightly increased by 3.0%. 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.
- The debt-to-equity ratio is very high at 9.12 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.42, which clearly demonstrates the inability to cover short-term cash 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. Compared to other companies in the Health Care Providers & Services industry and the overall market, EMERITUS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff