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) -- Simcere Pharmaceutical Group (NYSE: SCR) 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 2.5%. 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, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for SIMCERE PHARMACTCL GRP -ADR is currently very high, coming in at 83.08%. Regardless of SCR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SCR's net profit margin of 4.72% is significantly lower than the industry average.
- 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 Pharmaceuticals industry. The net income has decreased by 10.5% when compared to the same quarter one year ago, dropping from $4.21 million to $3.76 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Pharmaceuticals industry and the overall market, SIMCERE PHARMACTCL GRP -ADR's return on equity significantly trails that of both the industry average and the S&P 500.