Rating Change #6

UBS AG ( UBS) 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, generally weak debt management, disappointing return on equity, 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 against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 57.3% when compared to the same quarter one year ago, falling from $2,082.18 million to $889.70 million.
  • The debt-to-equity ratio is very high at 5.79 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, UBS AG has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.86%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.40% compared to the year-earlier 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.
  • UBS AG 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. 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, UBS AG turned its bottom line around by earning $2.09 versus -$0.74 in the prior year. For the next year, the market is expecting a contraction of 44.0% in earnings ($1.17 versus $2.09).

UBS AG, a financial services firm, provides wealth management, asset management, and investment banking products and services to private, corporate, and institutional clients worldwide. The company also involves in retail and commercial banking in Switzerland. The company has a P/E ratio of 13.2, above the average banking industry P/E ratio of 6.4 and below the S&P 500 P/E ratio of 17.7. UBS has a market cap of $48.2 billion and is part of the financial sector and banking industry. Shares are down 23.7% year to date as of the close of trading on Wednesday.

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

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