NEW YORK ( TheStreet) -- First American Financial (NYSE: FAF) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, unimpressive growth in net income, poor profit margins and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- FIRST AMERICAN FINANCIAL CP's earnings per share declined by 35.5% in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 27.8% in earnings ($0.78 versus $1.08).
- 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 Insurance industry. The net income has significantly decreased by 36.5% when compared to the same quarter one year ago, falling from $33.13 million to $21.04 million.
- The gross profit margin for FIRST AMERICAN FINANCIAL CP is currently extremely low, coming in at 7.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.20% trails that of the industry average.
- The share price of FIRST AMERICAN FINANCIAL CP has not done very well: it is down 18.52% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.0%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.