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) -- M.D.C. Holdings (NYSE: MDC) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.
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- MDC's very impressive revenue growth greatly exceeded the industry average of 21.5%. Since the same quarter one year prior, revenues leaped by 54.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MDC HOLDINGS INC 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MDC HOLDINGS INC turned its bottom line around by earning $1.26 versus -$2.11 in the prior year. This year, the market expects an improvement in earnings ($6.56 versus $1.26).
- The gross profit margin for MDC HOLDINGS INC is rather low; currently it is at 19.49%. Regardless of MDC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MDC's net profit margin of 54.06% significantly outperformed against the industry.
- MDC has underperformed the S&P 500 Index, declining 15.00% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has significantly decreased to -$90.83 million or 2918.02% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.