Rating Change #6
Deutsche Bank AG (DB) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally weak debt management, 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 against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 37.0% when compared to the same quarter one year ago, falling from $2,924.54 million to $1,841.43 million.
- The debt-to-equity ratio is very high at 5.41 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.
- Net operating cash flow has significantly decreased to -$23,345.17 million or 158.92% when compared to the same quarter last year. Despite a decrease in cash flow of 158.92%, DEUTSCHE BANK AG is still significantly exceeding the industry average of -391.67%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 38.34%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 36.42% compared to 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.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Capital Markets industry and the overall market, DEUTSCHE BANK AG's return on equity is below that of both the industry average and the S&P 500.