NEW YORK ( TheStreet) -- MBIA (NYSE: MBI) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally weak debt management, weak operating cash flow and feeble growth in its earnings per share. Highlights from the ratings report include:
- The debt-to-equity ratio is very high at 6.33 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.
- Net operating cash flow has significantly decreased to -$519.00 million or 103.92% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- MBIA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MBIA INC reported lower earnings of $0.28 versus $2.99 in the prior year. For the next year, the market is expecting a contraction of 1003.6% in earnings (-$2.53 versus $0.28).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Insurance industry and the overall market, MBIA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- After a year of stock price fluctuations, the net result is that MBI's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
-- Written by a member of TheStreet Ratings Staff