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) -- KBW (NYSE: KBW) 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, deteriorating net income and feeble growth in its earnings per share.
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- 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 Capital Markets industry and the overall market, KBW INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $1.80 million or 88.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The change in net income from the same quarter one year ago has exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has significantly decreased by 27.7% when compared to the same quarter one year ago, falling from -$4.25 million to -$5.42 million.
- KBW INC's earnings per share declined by 35.7% in the most recent quarter compared to 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, KBW INC swung to a loss, reporting -$1.07 versus $0.64 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$1.07).
- In its most recent trading session, KBW 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. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
-- Written by a member of TheStreet Ratings Staff