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) -- Healthways (Nasdaq: HWAY) 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, generally high debt management risk, 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 Health Care Providers & Services industry. The net income has significantly decreased by 46.9% when compared to the same quarter one year ago, falling from $9.46 million to $5.03 million.
- The debt-to-equity ratio of 1.06 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, HWAY maintains a poor quick ratio of 0.87, 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 Health Care Providers & Services industry and the overall market, HEALTHWAYS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for HEALTHWAYS INC is rather low; currently it is at 23.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.00% trails that of the industry average.
- HEALTHWAYS INC's earnings per share declined by 46.4% 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, HEALTHWAYS INC swung to a loss, reporting -$4.75 versus $1.36 in the prior year. This year, the market expects an improvement in earnings ($0.27 versus -$4.75).
-- Written by a member of TheStreet Ratings Staff