Rating Change #7
Research In Motion Ltd
has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the ratings report include:
- RESEARCH IN MOTION LTD 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. During the past fiscal year, RESEARCH IN MOTION LTD reported lower earnings of $2.23 versus $6.36 in the prior year.
- 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 Communications Equipment industry. The net income has significantly decreased by 174.5% when compared to the same quarter one year ago, falling from $695.00 million to -$518.00 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 Communications Equipment industry and the overall market, RESEARCH IN MOTION LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $711.00 million or 30.29% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.67%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 174.43% 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.
Research In Motion Limited designs, manufactures, and markets wireless solutions for the mobile communications market worldwide. The company has a P/E ratio of 4.1, equal to the average telecommunications industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Research in Motion has a market cap of $4.81 billion and is part of the
industry. Shares are down 37% year to date as of the close of trading on Friday.
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