NEW YORK ( TheStreet) -- Deer Consumer Products (Nasdaq: DEER) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Household Durables industry and the overall market, DEER CONSUMER PRODUCTS INC's return on equity exceeds that of both the industry average and the S&P 500.
- DEER's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.53, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DEER CONSUMER PRODUCTS INC is currently lower than what is desirable, coming in at 29.50%. Regardless of DEER's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DEER's net profit margin of 16.80% significantly outperformed against the industry.
- DEER's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 45.25%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- Net operating cash flow has decreased to $1.35 million or 15.62% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.