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) -- EXFO (Nasdaq: EXFO) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.
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- EXFO INC 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. During the past fiscal year, EXFO INC swung to a loss, reporting -$0.05 versus $0.11 in the prior year.
- 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 Communications Equipment industry. The net income has significantly decreased by 296.5% when compared to the same quarter one year ago, falling from $1.89 million to -$3.71 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market, EXFO INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of EXFO INC has not done very well: it is down 15.48% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for EXFO INC is rather high; currently it is at 63.30%. Regardless of EXFO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EXFO's net profit margin of -6.50% significantly underperformed when compared to the industry average.
-- Written by a member of TheStreet Ratings Staff