NEW YORK ( TheStreet) -- Emeritus Corportion (NYSE: ESC) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally weak debt management, disappointing return on equity, generally disappointing historical performance in the stock itself and poor profit margins.
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- 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 Health Care Providers & Services industry. The net income has significantly decreased by 197.8% when compared to the same quarter one year ago, falling from $22.20 million to -$21.72 million.
- The debt-to-equity ratio is very high at 9.12 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.42, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Providers & Services industry and the overall market, EMERITUS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of EMERITUS CORP has not done very well: it is down 15.64% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- The gross profit margin for EMERITUS CORP is rather low; currently it is at 21.10%. Regardless of ESC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -5.80% trails the industry average.
-- Written by a member of TheStreet Ratings Staff