NEW YORK ( TheStreet) -- Sothebys (NYSE: BID) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has increased to -$82.87 million or 10.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.48%.
  • Despite currently having a low debt-to-equity ratio of 0.53, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that BID's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.97 is high and demonstrates strong liquidity.
  • 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 Diversified Consumer Services industry. The net income has significantly decreased by 53.5% when compared to the same quarter one year ago, falling from -$19.36 million to -$29.72 million.
  • The gross profit margin for SOTHEBY'S is currently extremely low, coming in at 2.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -51.10% is significantly below that of the industry average.

Sotheby's, together with its subsidiaries, operates as an auctioneer of fine and decorative art, jewelry, and collectibles in North America, Europe, and Asia. The company operates in three segments: Auction, Finance, and Dealer. The company has a P/E ratio of 10.8, below the average specialty retail industry P/E ratio of 10.9 and below the S&P 500 P/E ratio of 17.7. Sothebys has a market cap of $2.06 billion and is part of the services sector and specialty retail industry. Shares are down 32.2% year to date as of the close of trading on Tuesday.

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