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) -- Rent-A-Center (Nasdaq: RCII) 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, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 1.5%. 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 gross profit margin for RENT-A-CENTER INC is rather high; currently it is at 68.86%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.69% trails 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 Specialty Retail industry. The net income has significantly decreased by 72.5% when compared to the same quarter one year ago, falling from $47.46 million to $13.06 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. In comparison to the other companies in the Specialty Retail industry and the overall market, RENT-A-CENTER INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.