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) -- China Lodging Group (Nasdaq: HTHT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- The revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 35.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CHINA LODGING GROUP LTD -ADR 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 year. We feel that this trend should continue. During the past fiscal year, CHINA LODGING GROUP LTD -ADR increased its bottom line by earning $0.46 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($3.52 versus $0.46).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 100.7% when compared to the same quarter one year prior, rising from -$1.50 million to $0.01 million.
- Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 41.39% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- HTHT's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.29 is very weak and demonstrates a lack of ability to pay short-term obligations.
-- Written by a member of TheStreet Ratings Staff