NEW YORK ( TheStreet) -- Ship Finance International (NYSE: SFL) 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, deteriorating net income, generally weak debt management, disappointing return on equity and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- SHIP FINANCE INTL LTD's earnings per share declined by 20.4% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SHIP FINANCE INTL LTD reported lower earnings of $2.10 versus $2.55 in the prior year. For the next year, the market is expecting a contraction of 20.9% in earnings ($1.66 versus $2.10).
- 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 Oil, Gas & Consumable Fuels industry. The net income has decreased by 20.7% when compared to the same quarter one year ago, dropping from $34.63 million to $27.45 million.
- The debt-to-equity ratio is very high at 2.41 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. To add to this, SFL has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, SHIP FINANCE INTL LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Looking at the price performance of SFL's shares over the past 12 months, there is not much good news to report: the stock is down 57.69%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.