NEW YORK ( TheStreet) -- Stifel Financial Corp (NYSE: SF) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, STIFEL FINANCIAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has significantly decreased to -$252.24 million or 218.18% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • STIFEL FINANCIAL CORP has improved earnings per share by 10.3% in the most recent quarter compared to the same quarter a year ago. 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, STIFEL FINANCIAL CORP swung to a loss, reporting -$0.15 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($2.54 versus -$0.15).
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • The revenue growth came in higher than the industry average of 2.7%. Since the same quarter one year prior, revenues rose by 18.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Stifel Financial Corp., a financial holding company, operates as a retail and institutional brokerage, and investment banking company in the United States and internationally. The company has a P/E ratio of 449.9, above the average financial services industry P/E ratio of 317.6 and above the S&P 500 P/E ratio of 17.7. Stifel Financial has a market cap of $1.9 billion and is part of the financial sector and financial services industry. Shares are down 12.5% year to date as of the close of trading on Tuesday.

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