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) -- CGI Group (NYSE: GIB) 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 and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
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- GIB's very impressive revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 56.0%. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- GIB's debt-to-equity ratio of 0.95 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that GIB's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.58 is low and demonstrates weak liquidity.
- CGI GROUP INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CGI GROUP INC reported lower earnings of $0.55 versus $1.57 in the prior year.
- 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 IT Services industry. The net income has significantly decreased by 329.8% when compared to the same quarter one year ago, falling from $73.09 million to -$167.97 million.
-- Written by a member of TheStreet Ratings Staff