NEW YORK (TheStreet) -- Digirad Corporation (Nasdaq:DRAD) 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 disappointing historical performance in the stock itself.
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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 Health Care Equipment & Supplies industry. The net income has significantly decreased by 292.5% when compared to the same quarter one year ago, falling from -$0.23 million to -$0.89 million.
- 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 Health Care Equipment & Supplies industry and the overall market, DIGIRAD CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DIGIRAD CORP is currently lower than what is desirable, coming in at 32.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.00% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$0.07 million or 108.89% 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 share price of DIGIRAD CORP has not done very well: it is down 24.34% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
-- 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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