NEW YORK ( TheStreet) -- Charm Communications (Nasdaq: CHRM) 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, reasonable valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- CHRM 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. To add to this, CHRM has a quick ratio of 1.62, which demonstrates the ability of the company to cover short-term liquidity needs.
- The revenue fell significantly faster than the industry average of 13.3%. Since the same quarter one year prior, revenues fell by 46.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 94.73% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 Media industry. The net income has significantly decreased by 93.0% when compared to the same quarter one year ago, falling from $7.87 million to $0.55 million.
-- Written by a member of TheStreet Ratings Staff