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) -- Callaway Golf Company (NYSE: ELY) 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, disappointing return on equity, poor profit margins and feeble growth in its earnings per share.
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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 Leisure Equipment & Products industry. The net income has significantly decreased by 38.7% when compared to the same quarter one year ago, falling from -$62.59 million to -$86.80 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Leisure Equipment & Products industry and the overall market, CALLAWAY GOLF CO's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CALLAWAY GOLF CO is currently lower than what is desirable, coming in at 26.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -58.70% is significantly below that of the industry average.
- CALLAWAY GOLF CO's earnings per share declined by 31.7% 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, CALLAWAY GOLF CO reported poor results of -$2.83 versus -$0.49 in the prior year. This year, the market expects an improvement in earnings (-$0.62 versus -$2.83).
- ELY, with its decline in revenue, underperformed when compared the industry average of 2.2%. Since the same quarter one year prior, revenues fell by 14.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff