NEW YORK ( TheStreet) -- Bitstream (Nasdaq: BITS) 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, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- The gross profit margin for BITSTREAM INC is rather high; currently it is at 55.20%. Regardless of BITS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BITS's net profit margin of -15.00% significantly underperformed when compared to the industry average.
- BITSTREAM 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BITSTREAM INC swung to a loss, reporting -$0.33 versus $0.08 in the prior year. This year, the market expects an improvement in earnings ($0.06 versus -$0.33).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.15%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 600.00% 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.
- 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 Software industry and the overall market, BITSTREAM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Software industry. The net income has significantly decreased by 686.2% when compared to the same quarter one year ago, falling from $0.17 million to -$0.98 million.