NEW YORK ( TheStreet) -- Lakes Entertainment (Nasdaq: LACO) 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 and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • LACO, with its decline in revenue, slightly underperformed the industry average of 4.3%. Since the same quarter one year prior, revenues fell by 11.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • LAKES ENTERTAINMENT 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 year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LAKES ENTERTAINMENT INC swung to a loss, reporting -$0.53 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.06 versus -$0.53).
  • 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 Hotels, Restaurants & Leisure industry and the overall market, LAKES ENTERTAINMENT 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 1057.0% when compared to the same quarter one year ago, falling from -$2.43 million to -$28.11 million.

Lakes Entertainment, Inc., together with its subsidiaries, develops, finances, and manages Indian-owned casino properties. The company has a P/E ratio of seven, equal to the average leisure industry P/E ratio and below the S&P 500 P/E ratio of 16.2. Lakes Entertainment has a market cap of $82.8 million and is part of the services sector and leisure industry. Shares are down 2.2% year to date as of the close of trading on Wednesday.

You can view the full Lakes Entertainment Ratings Report or get investment ideas from our investment research center.
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