3 Stocks Improving Performance Of The Services Sector

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.

All three major indices are trading down today with the Dow Jones Industrial Average ( ^DJI) trading down 14.32 points (-0.1%) at 16,933 as of Monday, June 23, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 1,387 issues advancing vs. 1,632 declining with 133 unchanged.

The Services sector as a whole closed the day down 0.1% versus the S&P 500, which was down 0.1%. Top gainers within the Services sector included Lime Energy ( LIME), up 2.6%, Acorn International ( ATV), up 1.7%, China HGS Real Estate ( HGSH), up 8.9%, Books-A-Million ( BAMM), up 1.9% and Dover Saddlery ( DOVR), up 6.7%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the sector higher today:

China HGS Real Estate ( HGSH) is one of the companies that pushed the Services sector higher today. China HGS Real Estate was up $0.26 (8.9%) to $3.17 on heavy volume. Throughout the day, 73,956 shares of China HGS Real Estate exchanged hands as compared to its average daily volume of 10,300 shares. The stock ranged in a price between $2.97-$3.25 after having opened the day at $3.19 as compared to the previous trading day's close of $2.91.

China HGS Real Estate, Inc., through its subsidiary, Shaanxi Guangsha Investment and Development Group Co., Ltd, develops real estate properties in the People's Republic of China. It is involved in the construction and sale of residential apartments, parking lots, and commercial properties. China HGS Real Estate has a market cap of $173.4 million and is part of the diversified services industry. Shares are down 51.1% year-to-date as of the close of trading on Friday. Currently there are no analysts who rate China HGS Real Estate a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates China HGS Real Estate as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from TheStreet Ratings analysis on HGSH go as follows:

  • HGSH's very impressive revenue growth greatly exceeded the industry average of 41.1%. Since the same quarter one year prior, revenues leaped by 157.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CHINA HGS REAL ESTATE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, CHINA HGS REAL ESTATE INC increased its bottom line by earning $0.46 versus $0.11 in the prior year.
  • HGSH's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.13 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for CHINA HGS REAL ESTATE INC is currently lower than what is desirable, coming in at 33.12%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 28.67% has significantly outperformed against the industry average.
  • Net operating cash flow has significantly decreased to -$3.65 million or 2084.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

You can view the full analysis from the report here: China HGS Real Estate Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, Acorn International ( ATV) was up $0.03 (1.7%) to $1.80 on heavy volume. Throughout the day, 35,896 shares of Acorn International exchanged hands as compared to its average daily volume of 12,300 shares. The stock ranged in a price between $1.80-$2.00 after having opened the day at $1.90 as compared to the previous trading day's close of $1.77.

Acorn International, Inc., an integrated multi-platform marketing company, develops, promotes, and sells a portfolio of proprietary-branded products; and third parties products. The company operates two sales platforms, including integrated direct sales and a nationwide distribution network. Acorn International has a market cap of $51.0 million and is part of the diversified services industry. Shares are up 14.1% year-to-date as of the close of trading on Friday. Currently there are no analysts who rate Acorn International a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Acorn International as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on ATV go as follows:

  • ACORN INTERNATIONAL INC -ADR's earnings per share declined by 30.4% 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 two years. During the past fiscal year, ACORN INTERNATIONAL INC -ADR reported poor results of -$1.45 versus -$0.59 in the prior year.
  • 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 Internet & Catalog Retail industry. The net income has decreased by 21.5% when compared to the same quarter one year ago, dropping from -$6.87 million to -$8.34 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, ACORN INTERNATIONAL INC -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of ACORN INTERNATIONAL INC -ADR has not done very well: it is down 22.57% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 43.21% is the gross profit margin for ACORN INTERNATIONAL INC -ADR which we consider to be strong. Regardless of ATV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ATV's net profit margin of -29.44% significantly underperformed when compared to the industry average.

You can view the full analysis from the report here: Acorn International Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Lime Energy ( LIME) was another company that pushed the Services sector higher today. Lime Energy was up $0.06 (2.6%) to $2.56 on heavy volume. Throughout the day, 12,120 shares of Lime Energy exchanged hands as compared to its average daily volume of 7,700 shares. The stock ranged in a price between $2.53-$2.60 after having opened the day at $2.53 as compared to the previous trading day's close of $2.49.

Lime Energy Co. is engaged in designing and implementing energy efficiency programs for utilities in the United States. Lime Energy has a market cap of $9.3 million and is part of the diversified services industry. Shares are down 13.5% year-to-date as of the close of trading on Friday. Currently there are no analysts who rate Lime Energy a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Lime Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on LIME go as follows:

  • Net operating cash flow has significantly decreased to -$6.94 million or 339.08% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for LIME ENERGY CO is currently lower than what is desirable, coming in at 31.90%. Regardless of LIME's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, LIME's net profit margin of -9.51% significantly underperformed when compared to the industry average.
  • LIME's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 50.40%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, LIME ENERGY CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • LIME has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Despite the fact that LIME's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.

You can view the full analysis from the report here: Lime Energy Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

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