Palomar Medical Technologies Inc. Stock Downgraded (PMTI)

Editor's Note: 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.

NEW YORK (TheStreet) -- Palomar Medical Technologies (Nasdaq:PMTI) 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 and feeble growth in its earnings per share.

• ACTIVE STOCK TRADERS: Get full access to Jim Cramer's thoughts for less than $3/week - sometimes before he says them on TV! Start with a 14-Day Free Trial.

Highlights from the ratings report include:

• 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 130.6% when compared to the same quarter one year ago, falling from $15.26 million to -$4.68 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 Health Care Equipment & Supplies industry and the overall market, PALOMAR MED TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
• PALOMAR MED TECHNOLOGIES INC 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PALOMAR MED TECHNOLOGIES INC turned its bottom line around by earning $0.40 versus -$0.48 in the prior year. For the next year, the market is expecting a contraction of 162.5% in earnings (-$0.25 versus $0.40).
• 36.70% is the gross profit margin for PALOMAR MED TECHNOLOGIES INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, PMTI's net profit margin of -25.30% significantly underperformed when compared to the industry average.
• Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

.

Palomar Medical Technologies, Inc., together with its subsidiaries, designs, manufactures, markets, and sells lasers and other light-based products, and related disposable items and accessories for use in dermatology and cosmetic procedures. The company has a P/E ratio of 16.7, equal to the average health services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Palomar Medical has a market cap of $167.1 million and is part of the health care sector and health services industry. Shares are down 7.8% year to date as of the close of trading on Friday.

You can view the full Palomar Medical Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

FREE from Real Money's Jim Cramer: Winners and Losers Election 2012 - Steps to take NOW so you can profit no matter who is in charge! Free download now.

For more information on Palomar Medical Technologies Inc. click any of the following:

• Palomar Medical Technologies Inc. Stock Price

• Palomar Medical Technologies Inc. Analyst Ratings

• Palomar Medical Technologies Inc. Key Stats & Profile

• Palomar Medical Technologies Inc. Earnings

• Palomar Medical Technologies Inc. Ratio Comparison

• Palomar Medical Technologies Inc. Growth Rates

• Palomar Medical Technologies Inc. Balance Sheet

• Palomar Medical Technologies Inc. Cash Flow

• Palomar Medical Technologies Inc. Income Statement