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) -- Resource Capital Corporation (NYSE: RSO) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its 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.
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- The gross profit margin for RESOURCE CAPITAL CORP is rather high; currently it is at 53.51%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RSO's net profit margin of 2.78% significantly trails the industry average.
- RSO, with its decline in revenue, underperformed when compared the industry average of 6.3%. Since the same quarter one year prior, revenues fell by 16.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 92.3% when compared to the same quarter one year ago, falling from $15.05 million to $1.17 million.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RESOURCE CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.