NEW YORK ( TheStreet) -- Overstock.com (Nasdaq: OSTK) 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, poor profit margins and weak operating cash flow.

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 Internet & Catalog Retail industry. The net income has significantly decreased by 131.9% when compared to the same quarter one year ago, falling from -$3.36 million to -$7.79 million.
  • The debt-to-equity ratio is very high at 2.34 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, OSTK maintains a poor quick ratio of 0.84, which illustrates the inability to avoid short-term cash problems.
  • 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 Internet & Catalog Retail industry and the overall market, OVERSTOCK.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for OVERSTOCK.COM INC is rather low; currently it is at 16.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.20% trails that of the industry average.
  • Net operating cash flow has decreased to $7.24 million or 11.92% when compared to the same quarter last year. Despite a decrease in cash flow of 11.92%, OVERSTOCK.COM INC is in line with the industry average cash flow growth rate of -15.64%.

Overstock.com, Inc. operates as an online retailer offering discount brand, non-brand, and closeout merchandise in the United States. Overstock.com has a market cap of $210.9 million and is part of the services sector and retail industry. Shares are down 49.6% year to date as of the close of trading on Tuesday.

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