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NEW YORK (TheStreet) -- American Realty Investors (ARL) - Get Report has been downgraded by TheStreet Ratings from Hold to Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICAN REALTY INVESTORS (ARL) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 6.75 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Net operating cash flow has significantly decreased to -$0.77 million or 129.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- ARL'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 41.96%, 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 Real Estate Management & Development industry and the overall market, AMERICAN REALTY INVESTORS's return on equity significantly trails that of both the industry average and the S&P 500.
- AMERICAN REALTY INVESTORS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, AMERICAN REALTY INVESTORS reported poor results of -$1.95 versus -$0.65 in the prior year.
- You can view the full analysis from the report here: ARL Ratings Report