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, disappointing return on equity, poor profit margins, generally weak debt management and generally disappointing historical performance in the stock itself.
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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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 257.0% when compared to the same quarter one year ago, falling from -$5.41 million to -$19.32 million.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, TOWER SEMICONDUCTOR LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for TOWER SEMICONDUCTOR LTD is currently lower than what is desirable, coming in at 34.80%. Regardless of TSEM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TSEM's net profit margin of -11.50% significantly underperformed when compared to the industry average.
- The debt-to-equity ratio is very high at 2.72 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, TSEM's quick ratio is somewhat strong at 1.22, demonstrating the ability to handle short-term liquidity needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.72%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 200.00% 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.
Tower Semiconductor Ltd., an independent semiconductor foundry, manufactures analog intensive mixed-signal semiconductor devices in the United States, India, the Asia Pacific, Europe, and Israel. Tower Semiconductor has a market cap of $230.8 million and is part of the
industry. Shares are up 12.7% year to date as of the close of trading on Wednesday.
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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.