NEW YORK ( TheStreet) -- Education Management Corporation (Nasdaq: EDMC) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, 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:
- Looking at the price performance of EDMC's shares over the past 12 months, there is not much good news to report: the stock is down 36.31%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Diversified Consumer Services industry average. The net income has significantly decreased by 26.0% when compared to the same quarter one year ago, falling from $85.28 million to $63.13 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Diversified Consumer Services industry and the overall market, EDUCATION MANAGEMENT CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to -$124.30 million or 119.55% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- EDUCATION MANAGEMENT CORP's earnings per share declined by 19.7% 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, EDUCATION MANAGEMENT CORP increased its bottom line by earning $1.65 versus $1.18 in the prior year. For the next year, the market is expecting a contraction of 31.5% in earnings ($1.13 versus $1.65).
-- Written by a member of TheStreet Ratings Staff