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) -- Firstmerit (Nasdaq: FMER) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and good cash flow from operations. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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- FIRSTMERIT CORP has improved earnings per share by 10.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FIRSTMERIT CORP increased its bottom line by earning $1.09 versus $1.02 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus $1.09).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Commercial Banks industry average. The net income increased by 10.1% when compared to the same quarter one year prior, going from $31.74 million to $34.95 million.
- The gross profit margin for FIRSTMERIT CORP is currently very high, coming in at 85.90%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 19.20% trails the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Commercial Banks industry and the overall market, FIRSTMERIT CORP's return on equity is below that of both the industry average and the S&P 500.
- FMER has underperformed the S&P 500 Index, declining 6.72% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
-- Written by a member of TheStreet Ratings Staff