TSC Ratings' Updates: Hartford

We rate Embarq (EQ Quote) a sell. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover.

The company's weaknesses can be seen in multiple areas, such as its generally weak debt management and decline in the stock price during the past year.

The debt-to-equity ratio is very high at 85.88 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. To add to this, Embarq has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

Embarq's share have plunged by 42.58% compared to where it was selling one year ago, apparently dragged down by the decline we have seen in the S&P 500 along with other factors. 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 gross profit margin for Embarq is rather high; currently it is at 63.40%. Regardless of Embarq's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, Embarq 's net profit margin of 10.50% compares favorably to the industry average. Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.4%.