NEW YORK ( TheStreet) -- Empresa Distribuidora y Comercializadora No (NYSE: EDN) 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:
- 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 Electric Utilities industry. The net income has significantly decreased by 889.1% when compared to the same quarter one year ago, falling from -$1.62 million to -$16.03 million.
- 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 Electric Utilities industry and the overall market, EMPRESA DISTRIBUIDORA Y COM's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for EMPRESA DISTRIBUIDORA Y COM is currently extremely low, coming in at 6.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.30% is significantly below that of the industry average.
- EMPRESA DISTRIBUIDORA Y COM 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. 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, EMPRESA DISTRIBUIDORA Y COM swung to a loss, reporting -$0.41 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus -$0.41).
- Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.