NEW YORK ( TheStreet) -- Healthways (Nasdaq: HWAY) 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, generally weak debt management, disappointing return on equity, poor profit margins 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 Health Care Providers & Services industry. The net income has significantly decreased by 1238.4% when compared to the same quarter one year ago, falling from $15.55 million to -$177.07 million.
- The debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, HWAY maintains a poor quick ratio of 0.88, which illustrates the inability to avoid short-term cash problems.
- 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 Health Care Providers & Services industry and the overall market, HEALTHWAYS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for HEALTHWAYS INC is currently lower than what is desirable, coming in at 26.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -98.40% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.73%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1282.22% 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.
-- Written by a member of TheStreet Ratings Staff