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 downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust 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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- INN's very impressive revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues leaped by 53.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, INN's share price has jumped by 31.68%, exceeding the performance of the broader market during that same time frame. 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.
- SUMMIT HOTEL PROPERTIES INC's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SUMMIT HOTEL PROPERTIES INC continued to lose money by earning -$0.19 versus -$0.37 in the prior year. This year, the market expects an improvement in earnings ($0.23 versus -$0.19).
- 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 Real Estate Investment Trusts (REITs) industry and the overall market, SUMMIT HOTEL PROPERTIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SUMMIT HOTEL PROPERTIES INC is currently lower than what is desirable, coming in at 26.00%. 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 -1.60% significantly underperformed when compared to the industry average.
-- Written by a member of TheStreet Ratings Staff