NEW YORK ( TheStreet) -- ACADIA Pharmaceuticals (Nasdaq: ACAD) 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, weak operating cash flow 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 Biotechnology industry. The net income has significantly decreased by 118.2% when compared to the same quarter one year ago, falling from $29.14 million to -$5.30 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 Biotechnology industry and the overall market, ACADIA PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$5.34 million or 215.94% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- ACADIA PHARMACEUTICALS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. 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, ACADIA PHARMACEUTICALS INC swung to a loss, reporting -$0.44 versus $0.38 in the prior year. This year, the market expects an improvement in earnings (-$0.41 versus -$0.44).
- After a year of stock price fluctuations, the net result is that ACAD'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. 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