Rating Change #2
Sony Corporation (SNE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
Highlights from the ratings report include:
- The gross profit margin for SONY CORP is currently extremely low, coming in at 6.70%. It has decreased from the same quarter the previous year.
- 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 Household Durables industry and the overall market, SONY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- SONY CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SONY CORP reported poor results of -$3.14 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus -$3.14).
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SNE's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.
- The revenue growth came in higher than the industry average of 13.9%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
Sony Corporation designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. The company has a P/E ratio of 7.6, below the S&P 500 P/E ratio of 17.7. Sony has a market cap of $27 billion and is part of the consumer goods sector and consumer durables industry. Shares are down 25.1% year to date as of the close of trading on Wednesday.You can view the full Sony Ratings Report or get investment ideas from our investment research center.
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