NEW YORK ( TheStreet) -- Smith Micro Software Incorporated (Nasdaq: SMSI) 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, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The revenue fell significantly faster than the industry average of 1.7%. Since the same quarter one year prior, revenues fell by 48.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • SMITH MICRO SOFTWARE INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SMITH MICRO SOFTWARE INC increased its bottom line by earning $0.35 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 171.4% in earnings (-$0.25 versus $0.35).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 68.17%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 540.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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 Software industry and the overall market, SMITH MICRO SOFTWARE INC'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 Software industry. The net income has significantly decreased by 516.3% when compared to the same quarter one year ago, falling from $1.89 million to -$7.85 million.

Smith Micro Software, Inc. designs, develops, and markets software products and services primarily for the mobile computing and communications industries worldwide. The company operates in two segments, Wireless, and Productivity and Graphics segments. The company has a P/E ratio of 39.3, equal to the average computer software & services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Smith Micro Software has a market cap of $127 million and is part of the technology sector and computer software & services industry. Shares are down 78.8% year to date as of the close of trading on Wednesday.

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