NEW YORK ( TheStreet) -- MedCath Corporation (Nasdaq: MDTH) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has significantly decreased to $1.08 million or 91.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for MEDCATH CORP is currently extremely low, coming in at 4.50%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 13.40% has significantly outperformed against the industry average.
- MDTH's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 28.51%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Health Care Providers & Services industry and the overall market, MEDCATH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- MDTH, with its decline in revenue, slightly underperformed the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.