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NEW YORK (TheStreet) -- Fiesta Restaurant Group (FRGI) has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate FIESTA RESTAURANT GROUP INC (FRGI) 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 growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 10.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels.
- Powered by its strong earnings growth of 61.90% and other important driving factors, this stock has surged by 33.57% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The gross profit margin for FIESTA RESTAURANT GROUP INC is currently lower than what is desirable, coming in at 29.50%. Regardless of FRGI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.89% 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. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, FIESTA RESTAURANT GROUP INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: FRGI Ratings Report