NEW YORK (
) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally weak debt management, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the ratings report include:
- The debt-to-equity ratio of 1.07 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.49, which clearly demonstrates the inability to cover short-term cash needs.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Household Durables industry and the overall market, DESARROLLADORA HOMEX SA's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for DESARROLLADORA HOMEX SA is rather low; currently it is at 23.50%. It has decreased significantly from the same period last year.
- Net operating cash flow has decreased to -$116.58 million or 36.52% when compared to the same quarter last year. Despite a decrease in cash flow of 36.52%, DESARROLLADORA HOMEX SA is still significantly exceeding the industry average of -154.91%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 57.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 39.13% compared to the year-earlier 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.
Desarrolladora Homex, S.A.B. de C.V. operates as a vertically integrated home development company principally engaged in the development, construction, and sale of affordable entry-level, middle-income, and tourism housing in Mexico; and affordable entry-level housing in Brazil. The company has a P/E ratio of six, above the average real estate industry P/E ratio of 5.6 and below the S&P 500 P/E ratio of 17.7. Homex Development has a market cap of $758.9 million and is part of the
industry. Shares are down 59.8% year to date as of the close of trading on Tuesday.
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