NEW YORK ( TheStreet) -- Vimicro International Corporation (Nasdaq: VIMC) 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, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. Highlights from the ratings report include:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, VIMICRO INTL CORP -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- VIMICRO INTL CORP -ADR's earnings per share declined by 25.0% 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, VIMICRO INTL CORP -ADR reported poor results of -$0.53 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings (-$0.26 versus -$0.53).
- Looking at the price performance of VIMC's shares over the past 12 months, there is not much good news to report: the stock is down 59.64%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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.
- The gross profit margin for VIMICRO INTL CORP -ADR is currently lower than what is desirable, coming in at 31.00%. Regardless of VIMC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, VIMC's net profit margin of -14.20% significantly underperformed when compared to the industry average.
- 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 Semiconductors & Semiconductor Equipment industry. The net income has decreased by 20.2% when compared to the same quarter one year ago, dropping from -$3.14 million to -$3.77 million.