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) -- Kemet Corporation (NYSE: KEM) 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, poor profit margins, weak operating cash flow and generally high debt management risk.
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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 155.7% when compared to the same quarter one year ago, falling from $31.85 million to -$17.75 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 Electronic Equipment, Instruments & Components industry and the overall market, KEMET CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for KEMET CORP is rather low; currently it is at 19.70%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -7.90% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$21.21 million or 498.02% 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 debt-to-equity ratio of 1.08 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, KEM has managed to keep a strong quick ratio of 1.84, which demonstrates the ability to cover short-term cash needs.
-- Written by a member of TheStreet Ratings Staff