ReachLocal Inc. Stock Downgraded (RLOC)

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) -- ReachLocal (Nasdaq: RLOC) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • RLOC has underperformed the S&P 500 Index, declining 7.71% from its price level of one year ago. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Media industry and the overall market, REACHLOCAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $9.16 million or 3.68% when compared to the same quarter last year. Despite an increase in cash flow, REACHLOCAL INC's cash flow growth rate is still lower than the industry average growth rate of 14.65%.
  • The gross profit margin for REACHLOCAL INC is rather high; currently it is at 50.50%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 0.30% trails the industry average.
  • RLOC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.

ReachLocal, Inc. provides a suite of online marketing and reporting solutions to small and medium-sized businesses (SMBs) primarily in the United States, Canada, Australia, the United Kingdom, India, the Netherlands, Germany, and Japan. ReachLocal has a market cap of $357.4 million and is part of the services sector and media industry. Shares are up 103.4% year to date as of the close of trading on Wednesday.

You can view the full ReachLocal Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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