NEW YORK (TheStreet) -- Federal-Mogul (Nasdaq:FDML) 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 weak debt management.
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- 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 Auto Components industry. The net income has significantly decreased by 190.6% when compared to the same quarter one year ago, falling from $64.00 million to -$58.00 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 Auto Components industry and the overall market, FEDERAL-MOGUL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for FEDERAL-MOGUL CORP is rather low; currently it is at 18.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.40% trails that of the industry average.
- Net operating cash flow has significantly decreased to -$25.00 million or 125.25% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 3.02 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Even though the debt-to-equity ratio is weak, FDML's quick ratio is somewhat strong at 1.45, demonstrating the ability to handle short-term liquidity needs.
-- 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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