NEW YORK ( TheStreet) -- China XD Plastics (Nasdaq: CXDC) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 125.98% to $1.43 million when compared to the same quarter last year. In addition, CHINA XD PLASTICS CO LTD has also vastly surpassed the industry average cash flow growth rate of -77.25%.
  • CHINA XD PLASTICS CO LTD reported flat earnings per share in the most recent quarter. 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, CHINA XD PLASTICS CO LTD turned its bottom line around by earning $0.60 versus -$0.25 in the prior year. This year, the market expects an improvement in earnings ($1.01 versus $0.60).
  • The gross profit margin for CHINA XD PLASTICS CO LTD is currently lower than what is desirable, coming in at 25.90%. Regardless of CXDC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CXDC's net profit margin of 15.60% significantly outperformed against the industry.
  • CXDC'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 39.40%, which is also worse than the performance of the S&P 500 Index. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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 Auto Components industry. The net income has decreased by 9.0% when compared to the same quarter one year ago, dropping from $13.08 million to $11.91 million.

China XD Plastics Company Limited, through its subsidiary, Harbin Xinda Macromolecule Material Co., Ltd., engages in the development, manufacture, and distribution of modified plastics primarily for automobile applications in China. The company has a P/E ratio of 6.9, equal to the average consumer non-durables industry P/E ratio and below the S&P 500 P/E ratio of 17.7. China XD has a market cap of $193.8 million and is part of the consumer goods sector and consumer non-durables industry. Shares are down 26.3% year to date as of the close of trading on Tuesday.

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