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 upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.
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- The revenue growth came in higher than the industry average of 16.1%. Since the same quarter one year prior, revenues rose by 26.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SUMMIT HOTEL PROPERTIES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SUMMIT HOTEL PROPERTIES INC continued to lose money by earning -$0.36 versus -$0.56 in the prior year. This year, the market expects an improvement in earnings (-$0.21 versus -$0.36).
- INN has underperformed the S&P 500 Index, declining 6.71% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for SUMMIT HOTEL PROPERTIES INC is currently lower than what is desirable, coming in at 32.50%. Regardless of INN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, INN's net profit margin of 3.04% is significantly lower than the industry average.
-- Written by a member of TheStreet Ratings Staff