NEW YORK ( TheStreet) -- Lannett Incorporated (AMEX: LCI) 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, generally disappointing historical performance in the stock itself 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 Pharmaceuticals industry. The net income has significantly decreased by 166.2% when compared to the same quarter one year ago, falling from $2.82 million to -$1.87 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 Pharmaceuticals industry and the overall market, LANNETT CO INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for LANNETT CO INC is currently extremely low, coming in at 14.70%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -7.30% is significantly below that of the industry average.
  • The share price of LANNETT CO INC has not done very well: it is down 6.95% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when 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.
  • LANNETT CO 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. 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, LANNETT CO INC swung to a loss, reporting -$0.01 versus $0.30 in the prior year. This year, the market expects an improvement in earnings ($0.41 versus -$0.01).

Lannett Company, Inc. develops, manufactures, packages, markets, and distributes generic pharmaceutical products sold under generic chemical names in the United States. The company has a P/E ratio of 22.6, equal to the average drugs industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Lannett has a market cap of $109.3 million and is part of the health care sector and drugs industry. Shares are down 31.1% year to date as of the close of trading on Thursday.

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