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) -- Groupon (Nasdaq:GRPN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself.
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- Net operating cash flow has significantly decreased to $8.76 million or 89.53% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- GRPN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.14%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 Internet & Catalog Retail industry and the overall market, GROUPON INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for GROUPON INC is rather high; currently it is at 63.00%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.66% trails the industry average.
- GROUPON 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, GROUPON INC continued to lose money by earning -$0.10 versus -$0.38 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus -$0.10).
-- Written by a member of TheStreet Ratings Staff
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