NEW YORK ( TheStreet) -- Pzena Investment Management (NYSE: PZN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow. Highlights from the ratings report include:
- PZN 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.
- Despite the weak revenue results, PZN has outperformed against the industry average of 22.8%. Since the same quarter one year prior, revenues slightly dropped by 9.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for PZENA INVESTMENT MANAGEMENT is rather high; currently it is at 50.30%. Regardless of PZN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PZN's net profit margin of 5.10% is significantly lower than the same period one year prior.
- 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 Capital Markets industry. The net income has significantly decreased by 39.2% when compared to the same quarter one year ago, falling from $1.66 million to $1.01 million.
- Looking at the price performance of PZN's shares over the past 12 months, there is not much good news to report: the stock is down 33.23%, 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. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, PZN is still more expensive than most of the other companies in its industry.
-- Written by a member of TheStreet Ratings Staff