NEW YORK ( TheStreet) -- ENGlobal Corporation (Nasdaq: ENG) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins and feeble growth in its earnings per share. Highlights from the ratings report include:
- Compared to its closing price of one year ago, ENG's share price has jumped by 38.75%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in ENG do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- ENGLOBAL CORP's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ENGLOBAL CORP swung to a loss, reporting -$0.43 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($0.25 versus -$0.43).
- The gross profit margin for ENGLOBAL CORP is currently extremely low, coming in at 8.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.60% is significantly below that of the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, ENGLOBAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Energy Equipment & Services industry. The net income has significantly decreased by 28.3% when compared to the same quarter one year ago, falling from -$1.54 million to -$1.97 million.