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"We rate GENERAL FINANCE CORP (GFN) 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 robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 22.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Trading Companies & Distributors industry. The net income increased by 301.7% when compared to the same quarter one year prior, rising from $1.16 million to $4.64 million.
- Powered by its strong earnings growth of 600.00% and other important driving factors, this stock has surged by 27.75% 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 return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, GENERAL FINANCE CORP/DE's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The debt-to-equity ratio is very high at 2.03 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full analysis from the report here: GFN Ratings Report