NEW YORK ( TheStreet) -- QKL Stores (Nasdaq: QKLS) 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, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

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 Food & Staples Retailing industry. The net income has significantly decreased by 182.3% when compared to the same quarter one year ago, falling from $1.03 million to -$0.85 million.
  • 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 Food & Staples Retailing industry and the overall market, QKL STORES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for QKL STORES INC is rather low; currently it is at 17.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.00% trails that of the industry average.
  • Net operating cash flow has decreased to $1.39 million or 32.04% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 74.52%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 200.00% 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.

QKL Stores Inc., through its subsidiaries, operates retail chain stores in the People's Republic of China. It operates a regional supermarket chain that includes supermarkets, hypermarkets, and department stores in northeastern China and Inner Mongolia. The company has a P/E ratio of 2.9, below the average retail industry P/E ratio of nine and below the S&P 500 P/E ratio of 17.7. QKL Stores has a market cap of $27.9 million and is part of the services sector and retail industry. Shares are down 74.2% year to date as of the close of trading on Thursday.

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