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) -- Cardtronics (Nasdaq: CATM) 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, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
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- The revenue growth greatly exceeded the industry average of 22.6%. Since the same quarter one year prior, revenues rose by 15.0%. 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.
- Net operating cash flow has slightly increased to $42.12 million or 9.67% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -14.96%.
- Compared to its closing price of one year ago, CATM's share price has jumped by 58.04%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The debt-to-equity ratio is very high at 2.14 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CATM has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the IT Services industry and the overall market, CARDTRONICS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.