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) -- Sothebys (NYSE: BID) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.
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- The revenue growth came in higher than the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 17.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- BID's debt-to-equity ratio of 0.81 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that BID's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.79 is high and demonstrates strong liquidity.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Diversified Consumer Services industry average, but is less than that of the S&P 500. The net income has decreased by 9.6% when compared to the same quarter one year ago, dropping from -$29.72 million to -$32.57 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, BID has underperformed the S&P 500 Index, declining 12.08% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- 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. When compared to other companies in the Diversified Consumer Services industry and the overall market, SOTHEBY'S's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff