NEW YORK (TheStreet) -- Skywest Incorporated (Nasdaq:SKYW) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, generally disappointing historical performance in the stock itself and poor profit margins.
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- 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 Airlines industry and the overall market, SKYWEST INC's return on equity significantly trails that of both the industry average and the S&P 500.
- SKYW'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 53.14%, 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.
- The gross profit margin for SKYWEST INC is currently extremely low, coming in at 9.20%. Regardless of SKYW'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 -0.10% trails the industry average.
- Even though the current debt-to-equity ratio is 1.34, it is still below the industry average, suggesting that this level of debt is acceptable within the Airlines industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.15 is sturdy.
- SKYWEST INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SKYWEST INC swung to a loss, reporting -$0.53 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus -$0.53).
-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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