NEW YORK ( TheStreet) -- American Equity Investment Life Holding Com (NYSE: AEL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The gross profit margin for AMERICAN EQTY INVT LIFE HLDG is currently extremely low, coming in at 14.30%. Regardless of AEL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AEL's net profit margin of 42.50% significantly outperformed against the industry.
  • 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 Insurance industry. The net income has significantly decreased by 163.7% when compared to the same quarter one year ago, falling from $20.51 million to -$13.07 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, AMERICAN EQTY INVT LIFE HLDG underperformed against that of the industry average and is significantly less than that of the S&P 500.

American Equity Investment Life Holding Company, through its subsidiaries, underwrites fixed annuity and life insurance products in the United States and the District of Columbia. The company has a P/E ratio of 14.6, below the average insurance industry P/E ratio of 15.8 and below the S&P 500 P/E ratio of 17.7. American Equity Investment Life Holding Com has a market cap of $659.7 million and is part of the financial sector and insurance industry. Shares are down 17.1% year to date as of the close of trading on Tuesday.

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