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) -- Assisted Living Concepts (NYSE: ALC) 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 disappointing historical performance in the stock itself.
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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 170.1% when compared to the same quarter one year ago, falling from $5.76 million to -$4.04 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 Health Care Providers & Services industry and the overall market, ASSISTED LIVING CONCEPTS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ASSISTED LIVING CONCEPTS INC is rather low; currently it is at 18.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -7.30% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $6.85 million or 54.49% when compared to the same quarter last year. Despite a decrease in cash flow ASSISTED LIVING CONCEPTS INC is still fairing well by exceeding its industry average cash flow growth rate of -70.80%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.15%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 172.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
-- Written by a member of TheStreet Ratings Staff