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) -- Scientific Games Corporation (Nasdaq: SGMS) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 279.4% when compared to the same quarter one year ago, falling from $7.02 million to -$12.59 million.
- The share price of SCIENTIFIC GAMES CORP has not done very well: it is down 14.90% 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 debt-to-equity ratio is very high at 3.11 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SGMS's quick ratio is somewhat strong at 1.35, demonstrating the ability to handle short-term liquidity needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, SCIENTIFIC GAMES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- 44.20% is the gross profit margin for SCIENTIFIC GAMES CORP which we consider to be strong. Regardless of SGMS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SGMS's net profit margin of -5.50% significantly underperformed when compared to the industry average.
-- Written by a member of TheStreet Ratings Staff