NEW YORK ( TheStreet) -- Charles River Laboratories International In (NYSE: CRL) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, generally disappointing historical performance in the stock itself and generally weak debt management. Highlights from the ratings report include:
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Life Sciences Tools & Services industry and the overall market, CHARLES RIVER LABS INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- CRL has underperformed the S&P 500 Index, declining 13.75% from its price level of one year ago. 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.
- The debt-to-equity ratio of 1.34 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, CRL's quick ratio is somewhat strong at 1.34, demonstrating the ability to handle short-term liquidity needs.
- CRL, with its decline in revenue, underperformed when compared the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- CHARLES RIVER LABS INTL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CHARLES RIVER LABS INTL INC swung to a loss, reporting -$5.81 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($2.47 versus -$5.81).