NEW YORK ( TheStreet) -- Obagi Medical Products (Nasdaq: OMPI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity. Highlights from the ratings report include:
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 244.44% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, OMPI is still more expensive than most of the other companies in its industry.
- 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 Pharmaceuticals industry and the overall market, OBAGI MEDICAL PRODUCTS INC's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for OBAGI MEDICAL PRODUCTS INC is currently very high, coming in at 79.40%. Regardless of OMPI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OMPI's net profit margin of -9.20% significantly underperformed when compared to the industry average.
- OMPI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, OMPI has a quick ratio of 2.22, which demonstrates the ability of the company to cover short-term liquidity needs.
- OMPI's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 3.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.