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 deteriorating net income, weak operating cash flow, generally disappointing historical performance in the stock itself and disappointing return on equity.
Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 100.4% when compared to the same quarter one year ago, falling from $27.24 million to -$0.10 million.
- Net operating cash flow has significantly decreased to $0.04 million or 99.62% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, SHENGKAI INNOVATIONS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 82.55%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100.68% 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.
- SHENGKAI INNOVATIONS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SHENGKAI INNOVATIONS INC turned its bottom line around by earning $5.34 versus -$4.96 in the prior year.
Shengkai Innovations, Inc., through its subsidiaries, engages in designing, manufacturing, and distributing ceramic valves and components for industrial use in the People's Republic of China. The company has a P/E ratio of 0.5, equal to the average wholesale industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Shengkai Innovations has a market cap of $14.3 million and is part of the
industry. Shares are down 38.9% year to date as of the close of trading on Friday.
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-- 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.