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) -- Expedia (Nasdaq: EXPE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and generally higher debt management risk.
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- EXPE's revenue growth has slightly outpaced the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 18.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- EXPEDIA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EXPEDIA INC reported lower earnings of $1.66 versus $2.16 in the prior year. This year, the market expects an improvement in earnings ($3.76 versus $1.66).
- Despite currently having a low debt-to-equity ratio of 0.58, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that EXPE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.62 is low and demonstrates weak liquidity.
- 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. When compared to other companies in the Internet & Catalog Retail industry and the overall market, EXPEDIA INC's return on equity is below that of both the industry average and the S&P 500.