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 upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, generally higher debt management risk and weak operating cash flow.
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- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Consumer Services industry and the overall market, STRAYER EDUCATION INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for STRAYER EDUCATION INC is rather high; currently it is at 51.10%. Regardless of STRA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, STRA's net profit margin of 12.53% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 14.3%. Since the same quarter one year prior, revenues slightly dropped by 8.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 38.31%, 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.
- 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 29.2% in earnings ($4.09 versus $5.77).
-- Written by a member of TheStreet Ratings Staff