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Tree.com Inc. Stock Downgraded (TREE)

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) -- Tree.com (Nasdaq: TREE) has been downgraded by TheStreet Ratings from hold to sell. The area that we feel has been the company's primary weakness has been its unimpressive growth in net income.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Thrifts & Mortgage Finance industry average, but is greater than that of the S&P 500. The net income increased by 71.7% when compared to the same quarter one year prior, rising from $1.18 million to $2.03 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 Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, TREE.COM INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for TREE.COM INC is currently very high, coming in at 93.90%. Regardless of TREE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.47% trails the industry average.
  • This stock has increased by 147.30% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in TREE do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • TREE.COM INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TREE.COM INC continued to lose money by earning -$0.24 versus -$4.52 in the prior year. This year, the market expects an improvement in earnings ($0.66 versus -$0.24).
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Tree.Com, Inc., through its subsidiaries, owns various brands and businesses that provide information, tools, advice, products, and services for critical transactions in consumers' lives. Tree.com has a market cap of $184.6 million and is part of the financial sector and real estate industry. Shares are down 0.8% year to date as of the close of trading on Thursday.

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

-- Written by a member of TheStreet Ratings Staff

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