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NEW YORK (TheStreet) -- Zhone Technologies (ZHNE) 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 ZHONE TECHNOLOGIES INC (ZHNE) a SELL. This is driven by a few notable weaknesses, 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 deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 Communications Equipment industry. The net income has significantly decreased by 269.5% when compared to the same quarter one year ago, falling from $1.60 million to -$2.71 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 Communications Equipment industry and the overall market, ZHONE TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of ZHONE TECHNOLOGIES INC has not done very well: it is down 17.53% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- ZHONE TECHNOLOGIES INC has experienced 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 reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ZHONE TECHNOLOGIES INC turned its bottom line around by earning $0.13 versus -$0.30 in the prior year. For the next year, the market is expecting a contraction of 146.2% in earnings (-$0.06 versus $0.13).
- ZHNE, with its decline in revenue, slightly underperformed the industry average of 3.8%. Since the same quarter one year prior, revenues slightly dropped by 6.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: ZHNE Ratings Report