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) -- CAI International (NYSE: CAP) 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 and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and disappointing return on equity.
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- CAP's revenue growth has slightly outpaced the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 9.4%. 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 CAI INTERNATIONAL INC is rather high; currently it is at 56.29%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, CAP's net profit margin of 28.57% significantly outperformed against the industry.
- CAI INTERNATIONAL INC's earnings per share declined by 18.8% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAI INTERNATIONAL INC reported lower earnings of $2.83 versus $3.19 in the prior year. This year, the market expects an improvement in earnings ($3.09 versus $2.83).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Trading Companies & Distributors industry. The net income has decreased by 10.4% when compared to the same quarter one year ago, dropping from $17.41 million to $15.59 million.
- The debt-to-equity ratio is very high at 2.75 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, CAP maintains a poor quick ratio of 0.70, which illustrates the inability to avoid short-term cash problems.