Heelys Inc. Stock Downgraded (HLYS)

NEW YORK ( TheStreet) -- Heelys (Nasdaq: HLYS) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • HEELYS INC's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, HEELYS INC reported poor results of -$0.20 versus -$0.14 in the prior year.
  • 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 33.6% when compared to the same quarter one year ago, falling from -$1.18 million to -$1.58 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. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, HEELYS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, HLYS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 46.70% is the gross profit margin for HEELYS INC which we consider to be strong. Regardless of HLYS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HLYS's net profit margin of -21.70% significantly underperformed when compared to the industry average.

Heelys, Inc., together with its subsidiaries, designs, markets, and distributes action sports-inspired products under the HEELYS brand to the youth market. Heelys has a market cap of $52.9 million and is part of the consumer goods sector and consumer non-durables industry. Shares are up 7.6% year to date as of the close of trading on Wednesday.

You can view the full Heelys Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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