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) -- Education Realty (NYSE: EDR) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.
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- The revenue growth came in higher than the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 34.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- EDUCATION REALTY TRUST INC 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, EDUCATION REALTY TRUST INC turned its bottom line around by earning $0.00 versus -$0.08 in the prior year. This year, the market expects an increase in earnings to $0.05 from $0.00.
- The gross profit margin for EDUCATION REALTY TRUST INC is rather low; currently it is at 16.60%. Regardless of EDR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, EDR's net profit margin of 7.08% is significantly lower than the industry average.
- EDR has underperformed the S&P 500 Index, declining 5.04% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.