NEW YORK ( TheStreet) -- Financial Engines (Nasdaq: FNGN) 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:
  • Net operating cash flow has decreased to $6.21 million or 18.72% when compared to the same quarter last year. Despite a decrease in cash flow FINANCIAL ENGINES INC is still fairing well by exceeding its industry average cash flow growth rate of -58.43%.
  • FINANCIAL ENGINES 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, FINANCIAL ENGINES INC increased its bottom line by earning $1.37 versus $0.10 in the prior year. For the next year, the market is expecting a contraction of 70.8% in earnings ($0.40 versus $1.37).
  • The gross profit margin for FINANCIAL ENGINES INC is rather high; currently it is at 66.60%. Regardless of FNGN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.80% trails the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 169.5% when compared to the same quarter one year prior, rising from $1.28 million to $3.46 million.

Financial Engines, Inc. and its subsidiaries provide independent, technology-enabled portfolio management services, investment advice, and retirement income services to participants in employer-sponsored defined contribution plans, such as 401(k) plans. The company has a P/E ratio of 12.4, below the average financial services industry P/E ratio of 13.2 and below the S&P 500 P/E ratio of 17.7. Financial Engines has a market cap of $843 million and is part of the financial sector and financial services industry. Shares are down 8.7% year to date as of the close of trading on Monday.

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