NEW YORK ( TheStreet) -- Echelon Corporation (Nasdaq: ELON) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- ELON'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 34.94%, 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 Electronic Equipment, Instruments & Components industry and the overall market, ECHELON CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- 44.20% is the gross profit margin for ECHELON CORP which we consider to be strong. Regardless of ELON's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.50% trails the industry average.
- Net operating cash flow has significantly increased by 152.57% to $6.27 million when compared to the same quarter last year. In addition, ECHELON CORP has also vastly surpassed the industry average cash flow growth rate of -56.55%.
- ECHELON CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ECHELON CORP continued to lose money by earning -$0.76 versus -$0.78 in the prior year. This year, the market expects an improvement in earnings (-$0.40 versus -$0.76).