NEW YORK ( TheStreet) -- Casella Waste Systems (Nasdaq: CWST) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in 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 Commercial Services & Supplies industry. The net income has significantly decreased by 287.0% when compared to the same quarter one year ago, falling from -$6.37 million to -$24.64 million.
- The debt-to-equity ratio is very high at 7.31 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. To add to this, CWST has a quick ratio of 0.58, 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 Commercial Services & Supplies industry and the overall market, CASELLA WASTE SYS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CASELLA WASTE SYS INC is currently lower than what is desirable, coming in at 30.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -21.50% is significantly below that of the industry average.
- The share price of CASELLA WASTE SYS INC has not done very well: it is down 10.32% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
-- Written by a member of TheStreet Ratings Staff