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) -- Einstein Noah Restaurant Group (Nasdaq: BAGL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity 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 poor profit margins.
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- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, EINSTEIN NOAH RESTAURANT GRP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $17.14 million or 25.24% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -9.85%.
- BAGL, with its decline in revenue, slightly underperformed the industry average of 2.8%. Since the same quarter one year prior, revenues slightly dropped by 3.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 48.3% when compared to the same quarter one year ago, falling from $6.12 million to $3.17 million.
- The debt-to-equity ratio is very high at 4.97 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