Corporate Executive Board Co Stock Downgraded (CEB)

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) -- Corporate Executive Board (NYSE: CEB) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and generally higher debt management risk.

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Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.2%. Since the same quarter one year prior, revenues rose by 11.9%. 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.
  • Net operating cash flow has increased to -$24.36 million or 27.70% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.57%.
  • The gross profit margin for CORPORATE EXECUTIVE BRD CO is rather high; currently it is at 63.41%. Regardless of CEB'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 -2.76% trails 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. When compared to other companies in the Professional Services industry and the overall market, CORPORATE EXECUTIVE BRD CO's return on equity is below that of both the industry average and the S&P 500.
  • In its most recent trading session, CEB has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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