NEW YORK ( TheStreet) -- PHH Corporation (NYSE: PHH) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, generally weak debt management, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- PHH CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PHH CORP reported lower earnings of $0.86 versus $2.75 in the prior year. This year, the market expects an improvement in earnings ($2.62 versus $0.86).
- Net operating cash flow has significantly decreased to -$1,231.00 million or 403.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Diversified Financial Services industry and the overall market, PHH CORP's return on equity is below that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 5.17 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.
- PHH has underperformed the S&P 500 Index, declining 5.68% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.