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) -- Federal Agricultural Mortgage (NYSE: AGM) 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, weak operating cash flow and feeble growth in its earnings per share.
- ACTIVE STOCK TRADERS: Check out TheStreet's special offer for Real Money, headlined by Jim Cramer, now!
- 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 Thrifts & Mortgage Finance industry. The net income has significantly decreased by 160.6% when compared to the same quarter one year ago, falling from $5.89 million to -$3.57 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 Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, FEDERAL AGRICULTURE MTG CP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to -$78.82 million or 250.08% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- FEDERAL AGRICULTURE MTG CP 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 two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FEDERAL AGRICULTURE MTG CP reported lower earnings of $1.21 versus $2.07 in the prior year. This year, the market expects an improvement in earnings ($3.88 versus $1.21).
- Compared to its closing price of one year ago, AGM's share price has jumped by 31.72%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
-- Written by a member of TheStreet Ratings Staff