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) -- Tower Group (Nasdaq: TWGP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins and feeble growth in the company's earnings per share.
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- Since the same quarter one year prior, revenues slightly increased by 1.9%. 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.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company.
- TOWER GROUP INTL LTD's earnings per share declined by 13.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TOWER GROUP INTL LTD swung to a loss, reporting -$0.71 versus $1.29 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus -$0.71).
- The gross profit margin for TOWER GROUP INTL LTD is currently extremely low, coming in at 7.85%. It has decreased from the same quarter the previous year.