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) -- ChinaEdu Corporation (Nasdaq: CEDU) 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, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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- The revenue growth came in higher than the industry average of 11.7%. Since the same quarter one year prior, revenues rose by 12.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CEDU 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. To add to this, CEDU has a quick ratio of 2.20, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for CHINAEDU CORP -ADR is rather high; currently it is at 60.40%. Regardless of CEDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CEDU's net profit margin of 11.13% compares favorably to the industry average.
- 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. In comparison to the other companies in the Diversified Consumer Services industry and the overall market, CHINAEDU CORP -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- CEDU has underperformed the S&P 500 Index, declining 9.16% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
-- Written by a member of TheStreet Ratings Staff