NEW YORK ( TheStreet) -- Forestar Group (NYSE: FOR) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- Looking at the price performance of FOR's shares over the past 12 months, there is not much good news to report: the stock is down 34.85%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, FOR is still more expensive than most of the other companies in its industry.
- FORESTAR GROUP INC's earnings per share declined by 22.2% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, FORESTAR GROUP INC reported lower earnings of $0.15 versus $1.64 in the prior year. For the next year, the market is expecting a contraction of 300.0% in earnings (-$0.30 versus $0.15).
- 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 Real Estate Management & Development industry. The net income has decreased by 19.8% when compared to the same quarter one year ago, dropping from -$3.27 million to -$3.92 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Management & Development industry and the overall market, FORESTAR GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for FORESTAR GROUP INC is rather low; currently it is at 24.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -15.40% is significantly below that of the industry average.