Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- American Campus Communities (NYSE: ACC) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and disappointing return on equity.
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- The revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 47.3%. 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.
- AMERICAN CAMPUS COMMUNITIES has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERICAN CAMPUS COMMUNITIES increased its bottom line by earning $0.60 versus $0.58 in the prior year. For the next year, the market is expecting a contraction of 11.7% in earnings ($0.53 versus $0.60).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 34.7% when compared to the same quarter one year ago, falling from $12.33 million to $8.05 million.
- The gross profit margin for AMERICAN CAMPUS COMMUNITIES is rather low; currently it is at 17.48%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.18% significantly trails the industry average.
- The share price of AMERICAN CAMPUS COMMUNITIES has not done very well: it is down 19.92% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.