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"We rate GAFISA SA (GFA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 40.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.86, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, GFA has a quick ratio of 1.53, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 203.91% to $5.82 million when compared to the same quarter last year. Despite an increase in cash flow, GAFISA SA's cash flow growth rate is still lower than the industry average growth rate of 247.68%.
- The gross profit margin for GAFISA SA is currently lower than what is desirable, coming in at 28.58%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.30% trails the industry average.
- In its most recent trading session, GFA 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. 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: GFA Ratings Report
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