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) -- Expedia (Nasdaq: EXPE) 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, reasonable valuation levels and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk.
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- EXPE's revenue growth has slightly outpaced the industry average of 19.6%. Since the same quarter one year prior, revenues rose by 24.0%. 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, EXPE's share price has jumped by 101.02%, 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.
- Net operating cash flow has slightly increased to $881.09 million or 4.86% when compared to the same quarter last year. Despite an increase in cash flow, EXPEDIA INC's average is still marginally south of the industry average growth rate of 11.37%.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Internet & Catalog Retail industry and the overall market, EXPEDIA INC's return on equity is below that of both the industry average and the S&P 500.
- 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 Internet & Catalog Retail industry. The net income has significantly decreased by 3076.7% when compared to the same quarter one year ago, falling from -$3.28 million to -$104.23 million.
-- Written by a member of TheStreet Ratings Staff