Bravo Brio Restaurant Group Inc. Stock Downgraded (BBRG)

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) -- Bravo Brio Restaurant Group (Nasdaq: BBRG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:
  • BBRG's debt-to-equity ratio is very low at 0.10 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 0.21 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.7%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, BRAVO BRIO RESTAURANT GP INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for BRAVO BRIO RESTAURANT GP INC is rather low; currently it is at 16.46%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.80% significantly trails the industry average.

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