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 0.5% versus the S&P 500, which was down 0.1%. Laggards within the Services sector included General Employment ( JOB), down 5.5%, Birks Group ( BGI), down 2.6%, RLJ Entertainment ( RLJE), down 2.5%, China Metro-Rural Holdings ( CNR), down 3.3% and Spar Group ( SGRP), down 6.0%.

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 $0.09 (6.0%) to $1.40 on light volume. Throughout the day, 6,038 shares of Spar Group exchanged hands as compared to its average daily volume of 14,200 shares. The stock ranged in price between $1.39-$1.46 after having opened the day at $1.46 as compared to the previous trading day's close of $1.49.

SPAR Group Inc., together with its subsidiaries, provides merchandising and other marketing services worldwide. Spar Group has a market cap of $29.2 million and is part of the diversified services industry. Shares are down 24.8% year-to-date as of the close of trading on Tuesday.

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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 12.4%. 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, China Metro-Rural Holdings ( CNR) was down $0.03 (3.3%) to $0.88 on heavy volume. Throughout the day, 36,150 shares of China Metro-Rural Holdings exchanged hands as compared to its average daily volume of 19,800 shares. The stock ranged in price between $0.88-$0.95 after having opened the day at $0.95 as compared to the previous trading day's close of $0.91.

China Metro-Rural Holdings has a market cap of $68.4 million and is part of the diversified services industry. Shares are up 1.1% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates China Metro-Rural Holdings a buy, no analysts rate it a sell, and none rate it a hold.

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RLJ Entertainment ( RLJE) was another company that pushed the Services sector lower today. RLJ Entertainment was down $0.08 (2.5%) to $2.90 on heavy volume. Throughout the day, 23,269 shares of RLJ Entertainment exchanged hands as compared to its average daily volume of 5,700 shares. The stock ranged in price between $2.90-$3.14 after having opened the day at $2.97 as compared to the previous trading day's close of $2.98.

RLJ Entertainment, Inc., an entertainment company, acquires content rights in British episodic mystery and drama, urban programming, and full-length motion pictures. It operates through three segments: Intellectual Property Licensing, Wholesale, and Direct-to-Consumer. RLJ Entertainment has a market cap of $43.0 million and is part of the diversified services industry. Shares are down 37.9% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates RLJ Entertainment as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on RLJE go as follows:

  • RLJ ENTERTAINMENT INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, RLJ ENTERTAINMENT INC reported poor results of -$2.30 versus -$0.49 in the prior year.
  • 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 183.1% when compared to the same quarter one year ago, falling from -$3.56 million to -$10.07 million.
  • 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, RLJ ENTERTAINMENT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RLJ ENTERTAINMENT INC is rather low; currently it is at 20.04%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -33.26% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.91%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 200.00% compared to the year-earlier 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.

You can view the full analysis from the report here: RLJ Entertainment 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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