NEW YORK ( TheStreet) -- Brookfield Residential Properties Inc (NYSE: BRP) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally weak debt management, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- The debt-to-equity ratio of 1.40 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- 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 Household Durables industry and the overall market, BROOKFIELD RESIDENTIAL PPTYS's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to -$12.72 million or 47.35% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The gross profit margin for BROOKFIELD RESIDENTIAL PPTYS is currently lower than what is desirable, coming in at 30.80%. Regardless of BRP's low profit margin, it has managed to increase from the same period last year.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 34.18%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 49.88% 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.