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) -- Gentium SpA (Nasdaq: GENT) 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, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- GENT's very impressive revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues leaped by 70.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- GENT's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GENT has a quick ratio of 2.26, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for GENTIUM SPA -ADR is currently very high, coming in at 76.40%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, GENT's net profit margin of 3.30% significantly trails the industry average.
- GENTIUM SPA -ADR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, GENTIUM SPA -ADR reported lower earnings of $0.23 versus $0.36 in the prior year. For the next year, the market is expecting a contraction of 133.9% in earnings (-$0.08 versus $0.23).
- 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 Biotechnology industry and the overall market, GENTIUM SPA -ADR's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff