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) -- Dynamics Research Corporation (Nasdaq: DRCO) 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, generally high debt management risk, disappointing return on equity and poor profit margins.
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- DYNAMICS RESEARCH CORP 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, DYNAMICS RESEARCH CORP reported lower earnings of $1.12 versus $1.22 in the prior year. For the next year, the market is expecting a contraction of 38.8% in earnings ($0.69 versus $1.12).
- 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 IT Services industry. The net income has significantly decreased by 728.2% when compared to the same quarter one year ago, falling from $3.28 million to -$20.59 million.
- The debt-to-equity ratio of 1.17 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, DRCO maintains a poor quick ratio of 0.94, which illustrates the inability to avoid short-term cash problems.
- 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 IT Services industry and the overall market, DYNAMICS RESEARCH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DYNAMICS RESEARCH CORP is rather low; currently it is at 15.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -26.80% is significantly below that of the industry average.
-- Written by a member of TheStreet Ratings Staff