NEW YORK ( TheStreet) -- Blue Nile (Nasdaq: NILE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow. Highlights from the ratings report include:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Internet & Catalog Retail industry and the overall market, BLUE NILE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- NILE's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
- NILE, with its decline in revenue, underperformed when compared the industry average of 24.9%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- BLUE NILE INC's earnings per share declined by 26.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, BLUE NILE INC reported lower earnings of $0.78 versus $0.95 in the prior year. For the next year, the market is expecting a contraction of 3.8% in earnings ($0.75 versus $0.78).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Internet & Catalog Retail industry. The net income has significantly decreased by 31.7% when compared to the same quarter one year ago, falling from $6.18 million to $4.22 million.
-- Written by a member of TheStreet Ratings Staff