NEW YORK ( TheStreet) -- LookSmart (Nasdaq: LOOK) 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, disappointing return on equity and feeble growth in its earnings per share. 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 Internet Software & Services industry. The net income has significantly decreased by 1610.7% when compared to the same quarter one year ago, falling from $0.12 million to -$1.84 million.
- 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 Internet Software & Services industry and the overall market, LOOKSMART LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- LOOKSMART LTD's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LOOKSMART LTD swung to a loss, reporting -$0.15 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$0.15).
- This stock's share value has moved by only 11.95% over the past year. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The revenue fell significantly faster than the industry average of 24.8%. Since the same quarter one year prior, revenues fell by 46.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff