3 Diversified Services Stocks Nudging The Industry Higher

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.

Two out of the three major indices are trading lower today with the Dow Jones Industrial Average ( ^DJI) trading down 55.52 points (-0.3%) at 17,690 as of Friday, July 31, 2015, 4:20 PM ET. The NYSE advances/declines ratio sits at 1,938 issues advancing vs. 1,140 declining with 130 unchanged.

The Diversified Services industry as a whole closed the day up 0.6% versus the S&P 500, which was down 0.2%. Top gainers within the Diversified Services industry included Compx International ( CIX), up 6.1%, VirtualScopics ( VSCP), up 2.2%, Essex Rental ( ESSX), up 3.6%, Lincoln Educational Services ( LINC), up 13.9% and NAPCO Security Technologies ( NSSC), up 1.6%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Essex Rental ( ESSX) is one of the companies that pushed the Diversified Services industry higher today. Essex Rental was up $0.02 (3.6%) to $0.57 on average volume. Throughout the day, 87,335 shares of Essex Rental exchanged hands as compared to its average daily volume of 80,700 shares. The stock ranged in a price between $0.52-$0.65 after having opened the day at $0.55 as compared to the previous trading day's close of $0.55.

Essex Rental Corp., through its subsidiaries, rents and distributes lifting equipment to the construction industry in North America. The company operates in four segments: Essex Crane Equipment Rentals; Coast Crane Equipment Rentals; Equipment Distribution; and Parts and Service. Essex Rental has a market cap of $12.5 million and is part of the services sector. Shares are down 62.1% year-to-date as of the close of trading on Thursday. Currently there are no analysts who rate Essex Rental a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Essex Rental as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on ESSX go as follows:

  • The change in the company's net income is in line with that of the S&P 500 when compared to the same quarter one year ago, however, it has performed much worse than the Trading Companies & Distributors industry average. The net income has decreased by 12.2% when compared to the same quarter one year ago, dropping from -$3.17 million to -$3.56 million.
  • The debt-to-equity ratio is very high at 4.28 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.12, which clearly demonstrates the inability to cover short-term cash needs.
  • 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. Compared to other companies in the Trading Companies & Distributors industry and the overall market, ESSEX RENTAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$2.63 million or 264.77% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Looking at the price performance of ESSX's shares over the past 12 months, there is not much good news to report: the stock is down 73.94%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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: Essex Rental Ratings Report

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At the close, VirtualScopics ( VSCP) was up $0.05 (2.2%) to $2.35 on light volume. Throughout the day, 1,007 shares of VirtualScopics exchanged hands as compared to its average daily volume of 5,300 shares. The stock ranged in a price between $2.24-$2.35 after having opened the day at $2.30 as compared to the previous trading day's close of $2.30.

VirtualScopics, Inc. provides imaging solutions to the pharmaceutical, biotechnology, and medical device industries. VirtualScopics has a market cap of $6.8 million and is part of the services sector. Shares are down 27.5% year-to-date as of the close of trading on Thursday. Currently there is 1 analyst who rates VirtualScopics a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates VirtualScopics as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on VSCP go as follows:

  • 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 Life Sciences Tools & Services industry and the overall market, VIRTUALSCOPICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$1.55 million or 273.31% 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 gross profit margin for VIRTUALSCOPICS INC is currently lower than what is desirable, coming in at 34.61%. Regardless of VSCP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, VSCP's net profit margin of -19.65% significantly underperformed when compared to the industry average.
  • VSCP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 37.92%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Life Sciences Tools & Services industry average, but is greater than that of the S&P 500. The net income increased by 14.4% when compared to the same quarter one year prior, going from -$0.65 million to -$0.55 million.

You can view the full analysis from the report here: VirtualScopics Ratings Report

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Compx International ( CIX) was another company that pushed the Diversified Services industry higher today. Compx International was up $0.69 (6.1%) to $11.85 on heavy volume. Throughout the day, 5,919 shares of Compx International exchanged hands as compared to its average daily volume of 800 shares. The stock ranged in a price between $11.25-$11.94 after having opened the day at $11.25 as compared to the previous trading day's close of $11.16.

CompX International Inc. engages in the manufacture and sale of security products and recreational marine components primarily in North America. The company operates through two segments, Security Products and Marine Components. Compx International has a market cap of $28.1 million and is part of the services sector. Shares are down 7.7% year-to-date as of the close of trading on Thursday. Currently there are no analysts who rate Compx International a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Compx International as a buy. 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, solid stock price performance, growth in earnings per share and increase in net income. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from TheStreet Ratings analysis on CIX go as follows:

  • The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 8.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CIX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.13, which clearly demonstrates the ability to cover short-term cash needs.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • COMPX INTERNATIONAL INC has improved earnings per share by 11.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, COMPX INTERNATIONAL INC increased its bottom line by earning $0.70 versus $0.49 in the prior year.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Services & Supplies industry average. The net income increased by 12.8% when compared to the same quarter one year prior, going from $2.14 million to $2.41 million.

You can view the full analysis from the report here: Compx International Ratings Report

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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.

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