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) -- Bitauto Holdings (NYSE: BITA) has been downgraded by TheStreet Ratings from hold to sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.
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- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet Software & Services industry and the overall market on the basis of return on equity, BITAUTO HOLDINGS LTD -ADR has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for BITAUTO HOLDINGS LTD -ADR is currently very high, coming in at 70.40%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 16.95% trails the industry average.
- BITA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.50, which clearly demonstrates the ability to cover short-term cash needs.
- This stock has increased by 97.78% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in BITA do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
-- Written by a member of TheStreet Ratings Staff