NEW YORK ( TheStreet) -- Newport Bancorp (Nasdaq: NFSB) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • 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 Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, NEWPORT BANCORP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Despite the weak revenue results, NFSB has significantly outperformed against the industry average of 30.9%. Since the same quarter one year prior, revenues slightly dropped by 0.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • NEWPORT BANCORP INC reported significant earnings per share improvement 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NEWPORT BANCORP INC increased its bottom line by earning $0.53 versus $0.19 in the prior year. For the next year, the market is expecting a contraction of 17.0% in earnings ($0.44 versus $0.53).
  • Net operating cash flow has decreased to $0.71 million or 39.12% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Newport Bancorp, Inc. operates as the holding company for Newport Federal Savings Bank, which provides various financial services to individuals and small businesses. The company has a P/E ratio of 24.2, equal to the average banking industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Newport has a market cap of $49 million and is part of the financial sector and banking industry. Shares are up 14.6% year to date as of the close of trading on Thursday.

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