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) -- Covenant Transportation Group (Nasdaq: CVTI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.
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- CVTI's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 9.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 166.66% and other important driving factors, this stock has surged by 85.84% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- COVENANT TRANSPORTATION GRP 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, COVENANT TRANSPORTATION GRP turned its bottom line around by earning $0.42 versus -$0.97 in the prior year. For the next year, the market is expecting a contraction of 10.7% in earnings ($0.38 versus $0.42).
- 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. In comparison to the other companies in the Road & Rail industry and the overall market, COVENANT TRANSPORTATION GRP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for COVENANT TRANSPORTATION GRP is currently extremely low, coming in at 9.70%. Regardless of CVTI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CVTI's net profit margin of 0.81% is significantly lower than the industry average.
-- Written by a member of TheStreet Ratings Staff