NEW YORK ( TheStreet) -- Addus Homecare Corporation (Nasdaq: ADUS) 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 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 Health Care Providers & Services industry. The net income has decreased by 19.4% when compared to the same quarter one year ago, dropping from $1.65 million to $1.33 million.
- The gross profit margin for ADDUS HOMECARE CORP is currently lower than what is desirable, coming in at 29.50%. Regardless of ADUS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.00% trails the industry average.
- ADDUS HOMECARE CORP's earnings per share declined by 25.0% in the most recent quarter compared to 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, ADDUS HOMECARE CORP increased its bottom line by earning $0.57 versus $0.32 in the prior year. For the next year, the market is expecting a contraction of 1.8% in earnings ($0.56 versus $0.57).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Health Care Providers & Services industry and the overall market, ADDUS HOMECARE CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- After a year of stock price fluctuations, the net result is that ADUS's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.