NEW YORK (TheStreet) -- DSP Group (Nasdaq:DSPG) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 456.1% when compared to the same quarter one year ago, falling from -$0.37 million to -$2.04 million.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, DSP GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DSP GROUP INC is currently lower than what is desirable, coming in at 33.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.50% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $1.12 million or 75.45% when compared to the same quarter last year. Despite a decrease in cash flow of 75.45%, DSP GROUP INC is in line with the industry average cash flow growth rate of -78.22%.
- The share price of DSP GROUP INC has not done very well: it is down 9.89% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
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