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) -- CAI International (NYSE: CAP) 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 increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and disappointing return on equity.
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- The revenue growth came in higher than the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 29.3%. 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, CAP's share price has jumped by 32.09%, 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.
- The gross profit margin for CAI INTERNATIONAL INC is currently very high, coming in at 91.80%. Regardless of CAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CAP's net profit margin of 31.52% significantly outperformed against the industry.
- Net operating cash flow has declined marginally to $24.93 million or 0.92% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 2.88 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CAP has a quick ratio of 0.58, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
-- Written by a member of TheStreet Ratings Staff