Editor's Note: 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 NEW YORK ( TheStreet) -- Viasystems Group (Nasdaq: VIAS) 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 high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
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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 Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 1146.5% when compared to the same quarter one year ago, falling from $3.18 million to -$33.31 million.
- The debt-to-equity ratio is very high at 2.33 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, VIAS maintains a poor quick ratio of 0.96, which illustrates the inability to avoid short-term cash problems.
- 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 Electronic Equipment, Instruments & Components industry and the overall market, VIASYSTEMS GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for VIASYSTEMS GROUP INC is rather low; currently it is at 20.70%. Regardless of VIAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, VIAS's net profit margin of -11.20% significantly underperformed when compared to the industry average.
- The share price of VIASYSTEMS GROUP INC has not done very well: it is down 14.01% 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. 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.
-- Written by a member of TheStreet Ratings Staff