NEW YORK (TheStreet) -- Clean Diesel Technologies (Nasdaq:CDTI) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, weak operating cash flow and poor profit margins. Highlights from the ratings report include:
- CDTI'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 33.13%, 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.
- Net operating cash flow has declined marginally to -$1.16 million or 0.87% when compared to the same quarter last year. Despite a decrease in cash flow of 0.87%, CLEAN DIESEL TECHNOLOGIES is in line with the industry average cash flow growth rate of -10.59%.
- The gross profit margin for CLEAN DIESEL TECHNOLOGIES is currently lower than what is desirable, coming in at 29.70%. Regardless of CDTI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.10% trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Chemicals industry and the overall market, CLEAN DIESEL TECHNOLOGIES's return on equity significantly trails that of both the industry average and the S&P 500.
- The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.96 is somewhat weak and could be cause for future problems.
-- Written by a member of TheStreet Ratings Staff
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