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) -- Spark Networks (AMEX: LOV) 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, disappointing return on equity and poor profit margins.
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- SPARK NETWORKS INC 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, SPARK NETWORKS INC swung to a loss, reporting -$0.07 versus $0.18 in the prior year. For the next year, the market is expecting a contraction of 264.3% in earnings (-$0.26 versus -$0.07).
- 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 Internet Software & Services industry. The net income has significantly decreased by 629.8% when compared to the same quarter one year ago, falling from -$0.24 million to -$1.74 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 Internet Software & Services industry and the overall market, SPARK NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SPARK NETWORKS INC is rather low; currently it is at 18.70%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -10.90% is significantly below that of the industry average.
- Compared to its closing price of one year ago, LOV's share price has jumped by 87.42%, exceeding the performance of the broader market during that same time frame. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.
-- Written by a member of TheStreet Ratings Staff