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 unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and generally weak debt management.
Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Health Care Technology industry average. The net income has decreased by 15.9% when compared to the same quarter one year ago, dropping from -$1.59 million to -$1.84 million.
- Net operating cash flow has significantly decreased to $2.17 million or 68.54% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 2.55 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Even though the debt-to-equity ratio is weak, MRGE's quick ratio is somewhat strong at 1.28, demonstrating the ability to handle short-term liquidity needs.
- MRGE'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 57.25%, 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 Health Care Technology industry and the overall market, MERGE HEALTHCARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
Merge Healthcare Incorporated provides healthcare information technology solutions in the United States and internationally. Its software solutions automate healthcare data and diagnostic workflow to create an electronic record of the patient experience. The company has a P/E ratio of 3.8, below the S&P 500 P/E ratio of 17.7. Merge Healthcare has a market cap of $242.6 million and is part of the
industry. Shares are down 45.8% year to date as of the close of trading on Wednesday.
You can view the full
or get investment ideas from our
-- Written by a member of TheStreet Ratings Staff
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.