NEW YORK ( TheStreet) -- Rovi (Nasdaq: ROVI) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself, deteriorating net income and feeble growth in its earnings per share.
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- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Software industry and the overall market, ROVI CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $51.73 million or 12.88% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 69.21%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 166.66% 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 change in net income from the same quarter one year ago has exceeded that of the Software industry average, but is less than that of the S&P 500. The net income has significantly decreased by 72.9% when compared to the same quarter one year ago, falling from -$10.73 million to -$18.55 million.
- ROVI CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROVI CORP reported lower earnings of $0.13 versus $2.08 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $0.13).
-- Written by a member of TheStreet Ratings Staff