3 Stocks Pushing The Diversified Services Industry Lower

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.

The Diversified Services industry as a whole closed the day down 1.4% versus the S&P 500, which was down 0.5%. Laggards within the Diversified Services industry included Learning Tree International ( LTRE), down 3.0%, Spar Group ( SGRP), down 2.6%, Lime Energy ( LIME), down 2.7%, RLJ Entertainment ( RLJE), down 3.0% and Magal Security Systems ( MAGS), down 4.2%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

Lime Energy ( LIME) is one of the companies that pushed the Diversified Services industry lower today. Lime Energy was down $0.07 (2.7%) to $2.50 on heavy volume. Throughout the day, 9,809 shares of Lime Energy exchanged hands as compared to its average daily volume of 6,300 shares. The stock ranged in price between $2.50-$2.68 after having opened the day at $2.59 as compared to the previous trading day's close of $2.57.

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 $9.6 million and is part of the services sector. Shares are down 11.1% year-to-date as of the close of trading on Thursday.

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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 48.62%, 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

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At the close, Spar Group ( SGRP) was down $0.04 (2.6%) to $1.51 on average volume. Throughout the day, 5,553 shares of Spar Group exchanged hands as compared to its average daily volume of 6,500 shares. The stock ranged in price between $1.51-$1.58 after having opened the day at $1.55 as compared to the previous trading day's close of $1.55.

SPAR Group Inc., together with its subsidiaries, provides merchandising and other marketing services worldwide. Spar Group has a market cap of $32.0 million and is part of the services sector. Shares are down 21.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Spar Group as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.

Highlights from TheStreet Ratings analysis on SGRP go as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 14.6%. Since the same quarter one year prior, revenues rose by 12.2%. 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.
  • SGRP's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SGRP has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SPAR GROUP INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SPAR GROUP INC increased its bottom line by earning $0.15 versus $0.13 in the prior year.
  • Net operating cash flow has significantly decreased to $2.47 million or 50.56% 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 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 Media industry. The net income has significantly decreased by 938.6% when compared to the same quarter one year ago, falling from $0.04 million to -$0.37 million.

You can view the full analysis from the report here: Spar Group Ratings Report

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Learning Tree International ( LTRE) was another company that pushed the Diversified Services industry lower today. Learning Tree International was down $0.08 (3.0%) to $2.60 on heavy volume. Throughout the day, 3,558 shares of Learning Tree International exchanged hands as compared to its average daily volume of 2,300 shares. The stock ranged in price between $2.53-$2.62 after having opened the day at $2.53 as compared to the previous trading day's close of $2.68.

Learning Tree International, Inc., together with its subsidiaries, develops, markets, and delivers a library of instructor-led classroom courses to meet the professional development needs of information technology (IT) professionals and managers worldwide. Learning Tree International has a market cap of $35.4 million and is part of the services sector. Shares are down 14.7% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Learning Tree International as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on LTRE go as follows:

  • 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 Diversified Consumer Services industry. The net income has decreased by 14.6% when compared to the same quarter one year ago, dropping from -$4.02 million to -$4.60 million.
  • Net operating cash flow has significantly decreased to -$4.36 million or 87.65% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, LTRE has underperformed the S&P 500 Index, declining 22.57% from its price level of one year ago. 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.
  • 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 Diversified Consumer Services industry and the overall market, LEARNING TREE INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 42.87% is the gross profit margin for LEARNING TREE INTL INC which we consider to be strong. Regardless of LTRE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LTRE's net profit margin of -18.40% significantly underperformed when compared to the industry average.

You can view the full analysis from the report here: Learning Tree 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.

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