3 Stocks Pushing The Services Sector 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 Services sector as a whole closed the day down 0.9% versus the S&P 500, which was down 0.4%. Laggards within the Services sector included Radiant Logistics ( RLGT), down 1.6%, Taitron Components ( TAIT), down 3.5%, Starz ( STRZB), down 2.6%, Universal Security Instruments ( UUU), down 4.4% and Spar Group ( SGRP), down 3.3%.

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

Spar Group ( SGRP) is one of the companies that pushed the Services sector lower today. Spar Group was down $0.05 (3.3%) to $1.45 on average volume. Throughout the day, 5,618 shares of Spar Group exchanged hands as compared to its average daily volume of 6,600 shares. The stock ranged in price between $1.45-$1.55 after having opened the day at $1.48 as compared to the previous trading day's close of $1.50.

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 consumer durables industry. Shares are down 24.2% year-to-date as of the close of trading on Wednesday.

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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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At the close, Universal Security Instruments ( UUU) was down $0.20 (4.4%) to $4.32 on light volume. Throughout the day, 300 shares of Universal Security Instruments exchanged hands as compared to its average daily volume of 2,100 shares. The stock ranged in price between $4.32-$4.34 after having opened the day at $4.34 as compared to the previous trading day's close of $4.52.

Universal Security Instruments, Inc. designs, markets, and distributes safety and security products in the United States and Canada. Universal Security Instruments has a market cap of $10.0 million and is part of the consumer durables industry. Shares are up 4.4% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates Universal Security Instruments as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on UUU 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 Electrical Equipment industry. The net income has significantly decreased by 1695.7% when compared to the same quarter one year ago, falling from $0.02 million to -$0.37 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. Compared to other companies in the Electrical Equipment industry and the overall market, UNIVERSAL SECURITY INSTRUMNT's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $0.68 million or 45.83% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for UNIVERSAL SECURITY INSTRUMNT is currently lower than what is desirable, coming in at 30.38%. Regardless of UUU's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, UUU's net profit margin of -9.81% significantly underperformed when compared to the industry average.
  • The share price of UNIVERSAL SECURITY INSTRUMNT has not done very well: it is down 20.56% 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.

You can view the full analysis from the report here: Universal Security Instruments Ratings Report

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Radiant Logistics ( RLGT) was another company that pushed the Services sector lower today. Radiant Logistics was down $0.05 (1.6%) to $3.02 on heavy volume. Throughout the day, 8,199 shares of Radiant Logistics exchanged hands as compared to its average daily volume of 1,300 shares. The stock ranged in price between $3.00-$3.06 after having opened the day at $3.02 as compared to the previous trading day's close of $3.07.

Radiant Logistics, Inc. operates as a non-asset based transportation and logistic services company in the United States and internationally. Radiant Logistics has a market cap of $105.8 million and is part of the consumer durables industry. Shares are up 14.6% year-to-date as of the close of trading on Wednesday. Currently there is 1 analyst who rates Radiant Logistics a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Radiant Logistics as a buy. 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, compelling growth in net income, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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Highlights from TheStreet Ratings analysis on RLGT go as follows:

  • The revenue growth came in higher than the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 18.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RLGT's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.19, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Air Freight & Logistics industry. The net income increased by 86.8% when compared to the same quarter one year prior, rising from $0.88 million to $1.65 million.
  • Powered by its strong earnings growth of 50.00% and other important driving factors, this stock has surged by 53.84% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • RADIANT LOGISTICS 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, RADIANT LOGISTICS INC increased its bottom line by earning $0.10 versus $0.06 in the prior year. For the next year, the market is expecting a contraction of 10.0% in earnings ($0.09 versus $0.10).

You can view the full analysis from the report here: Radiant Logistics 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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