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) -- Strayer Education (Nasdaq: STRA) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself.
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- STRAYER EDUCATION INC's earnings per share declined by 23.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, STRAYER EDUCATION INC reported lower earnings of $5.77 versus $8.83 in the prior year. For the next year, the market is expecting a contraction of 27.2% in earnings ($4.20 versus $5.77).
- The change in net income from the same quarter one year ago has exceeded that of the Diversified Consumer Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 28.2% when compared to the same quarter one year ago, falling from $23.99 million to $17.23 million.
- The debt-to-equity ratio is very high at 3.84 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, STRA has managed to keep a strong quick ratio of 1.85, which demonstrates the ability to cover short-term cash needs.
- Looking at the price performance of STRA's shares over the past 12 months, there is not much good news to report: the stock is down 53.21%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Net operating cash flow has decreased to $31.39 million or 13.94% when compared to the same quarter last year. Despite a decrease in cash flow of 13.94%, STRAYER EDUCATION INC is still significantly exceeding the industry average of -297.77%.
-- Written by a member of TheStreet Ratings Staff