NEW YORK ( TheStreet) -- Lihua International (Nasdaq: LIWA) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Electrical Equipment industry average. The net income increased by 41.3% when compared to the same quarter one year prior, rising from $8.86 million to $12.51 million.
- LIHUA INTERNATIONAL INC has improved earnings per share by 20.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, LIHUA INTERNATIONAL INC increased its bottom line by earning $1.34 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($1.78 versus $1.34).
- LIWA'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 28.23%, 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. 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.
- Net operating cash flow has significantly decreased to $1.31 million or 86.09% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for LIHUA INTERNATIONAL INC is currently extremely low, coming in at 12.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 9.10% trails that of the industry average.