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) -- Pinnacle Entertainment (NYSE: PNK) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- PNK's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 54.7% when compared to the same quarter one year prior, rising from -$0.79 million to -$0.36 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, PINNACLE ENTERTAINMENT INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The debt-to-equity ratio is very high at 2.83 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
-- Written by a member of TheStreet Ratings Staff