NEW YORK (TheStreet) -- Emulex Corporation (NYSE:ELX) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been unimpressive growth in net income over time.
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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 Communications Equipment industry. The net income has significantly decreased by 83.3% when compared to the same quarter one year ago, falling from -$15.69 million to -$28.77 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, EMULEX CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for EMULEX CORP is rather high; currently it is at 66.80%. Regardless of ELX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ELX's net profit margin of -22.30% significantly underperformed when compared to the industry average.
- EMULEX CORP 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. 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, EMULEX CORP continued to lose money by earning -$0.14 versus -$0.96 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus -$0.14).
- 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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