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) -- Zuoan Fashion (NYSE: ZA) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. 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.
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- ZA's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.64, which clearly demonstrates the ability to cover short-term cash needs.
- 41.84% is the gross profit margin for ZUOAN FASHION LTD -ADR which we consider to be strong. Regardless of ZA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.11% trails the industry average.
- 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. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market on the basis of return on equity, ZUOAN FASHION LTD -ADR has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 74.5% when compared to the same quarter one year ago, falling from $14.99 million to $3.82 million.