NEW YORK ( TheStreet) -- Depomed (Nasdaq: DEPO) 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, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
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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 Pharmaceuticals industry. The net income has significantly decreased by 177.8% when compared to the same quarter one year ago, falling from -$5.68 million to -$15.78 million.
- 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 Pharmaceuticals industry and the overall market, DEPOMED INC's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, DEPO 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.
- DEPOMED INC 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DEPOMED INC increased its bottom line by earning $1.26 versus $0.08 in the prior year. For the next year, the market is expecting a contraction of 165.9% in earnings (-$0.83 versus $1.26).
- The revenue fell significantly faster than the industry average of 2.1%. Since the same quarter one year prior, revenues fell by 33.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff