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 0.1% versus the S&P 500, which was up 0.1%. Laggards within the Services sector included Crystal Rock Holdings ( CRVP), down 2.5%, Birks Group ( BGI), down 7.6%, General Employment ( JOB), down 1.6%, Radio One ( ROIA), down 2.1% and Universal Security Instruments ( UUU), down 2.3%.

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

New Oriental Education & Technology Group I ( EDU) is one of the companies that pushed the Services sector lower today. New Oriental Education & Technology Group I was down $1.08 (5.2%) to $19.46 on heavy volume. Throughout the day, 4,772,919 shares of New Oriental Education & Technology Group I exchanged hands as compared to its average daily volume of 964,300 shares. The stock ranged in price between $18.88-$20.55 after having opened the day at $20.50 as compared to the previous trading day's close of $20.53.

New Oriental Education & Technology Group Inc. provides private educational services primarily in the People's Republic of China (PRC). New Oriental Education & Technology Group I has a market cap of $3.9 billion and is part of the diversified services industry. Shares are down 34.8% year-to-date as of the close of trading on Wednesday. Currently there are 5 analysts who rate New Oriental Education & Technology Group I a buy, no analysts rate it a sell, and 1 rates it a hold.

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TheStreet Ratings rates New Oriental Education & Technology Group I as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per share growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from TheStreet Ratings analysis on EDU go as follows:

  • The revenue growth came in higher than the industry average of 1.8%. Since the same quarter one year prior, revenues rose by 20.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • EDU 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. To add to this, EDU has a quick ratio of 1.94, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Diversified Consumer Services industry and the overall market, NEW ORIENTAL ED & TECH's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • NEW ORIENTAL ED & TECH 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. We feel that this trend should continue. During the past fiscal year, NEW ORIENTAL ED & TECH increased its bottom line by earning $1.38 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.64 versus $1.38).
  • The gross profit margin for NEW ORIENTAL ED & TECH is rather high; currently it is at 60.41%. Regardless of EDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 14.91% trails the industry average.

You can view the full analysis from the report here: New Oriental Education & Technology Group I Ratings Report

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At the close, Universal Security Instruments ( UUU) was down $0.09 (2.3%) to $3.75 on light volume. Throughout the day, 2,069 shares of Universal Security Instruments exchanged hands as compared to its average daily volume of 4,000 shares. The stock ranged in price between $3.75-$3.80 after having opened the day at $3.75 as compared to the previous trading day's close of $3.84.

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 $9.3 million and is part of the diversified services industry. Shares are down 11.3% 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 24.58% 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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Radio One ( ROIA) was another company that pushed the Services sector lower today. Radio One was down $0.10 (2.1%) to $4.75 on light volume. Throughout the day, 100 shares of Radio One exchanged hands as compared to its average daily volume of 2,900 shares. The stock ranged in price between $4.75-$4.75 after having opened the day at $4.75 as compared to the previous trading day's close of $4.85.

Radio One, Inc., together with its subsidiaries, operates as an urban-oriented multi-media company in the United States. The company operates through four segments: Radio Broadcasting, Reach Media, Internet, and Cable Television. Radio One has a market cap of $11.3 million and is part of the diversified services industry. Shares are up 27.6% year-to-date as of the close of trading on Wednesday.

TheStreet Ratings rates Radio One as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk.

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Highlights from TheStreet Ratings analysis on ROIA go as follows:

  • Compared to its closing price of one year ago, ROIA's share price has jumped by 111.94%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 14.7%. Since the same quarter one year prior, revenues rose by 12.1%. 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 RADIO ONE INC is rather high; currently it is at 68.24%. Regardless of ROIA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ROIA's net profit margin of -22.67% significantly underperformed when compared to the industry average.
  • 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 Media industry and the overall market, RADIO ONE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 Media industry. The net income has significantly decreased by 39.1% when compared to the same quarter one year ago, falling from -$18.11 million to -$25.18 million.

You can view the full analysis from the report here: Radio One 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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