NEW YORK ( TheStreet) -- Shutterfly (Nasdaq: SFLY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income. Highlights from the ratings report include:
- SFLY's very impressive revenue growth exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues leaped by 59.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- SFLY has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.00, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SHUTTERFLY INC is rather high; currently it is at 56.20%. Regardless of SFLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SFLY's net profit margin of -11.00% significantly underperformed when compared to the industry average.
- SHUTTERFLY INC's earnings per share declined by 7.4% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, SHUTTERFLY INC reported lower earnings of $0.30 versus $0.52 in the prior year. For the next year, the market is expecting a contraction of 6.7% in earnings ($0.28 versus $0.30).
- 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 & Catalog Retail industry. The net income has significantly decreased by 29.4% when compared to the same quarter one year ago, falling from -$7.76 million to -$10.04 million.
-- Written by a member of TheStreet Ratings Staff