NEW YORK ( TheStreet) -- ShangPharma (NYSE: SHP) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally disappointing historical performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- 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 Life Sciences Tools & Services industry average. The net income has decreased by 15.2% when compared to the same quarter one year ago, dropping from $2.55 million to $2.16 million.
- Looking at the price performance of SHP's shares over the past 12 months, there is not much good news to report: the stock is down 43.34%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for SHANGPHARMA CORP -ADR is currently lower than what is desirable, coming in at 32.70%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.10% trails the industry average.
- When compared to other companies in the Life Sciences Tools & Services industry and the overall market, SHANGPHARMA CORP -ADR's return on equity is below that of both the industry average and the S&P 500.
- SHANGPHARMA CORP -ADR's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SHANGPHARMA CORP -ADR increased its bottom line by earning $0.60 versus $0.33 in the prior year. This year, the market expects an improvement in earnings ($0.86 versus $0.60).
-- Written by a member of TheStreet Ratings Staff