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) -- Diamond Foods (Nasdaq: DMND) 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, poor profit margins and generally high debt management risk.
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- DIAMOND FOODS 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, DIAMOND FOODS INC reported lower earnings of $1.43 versus $1.48 in the prior year. For the next year, the market is expecting a contraction of 44.0% in earnings ($0.80 versus $1.43).
- 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 Food Products industry. The net income has significantly decreased by 1413.2% when compared to the same quarter one year ago, falling from $3.35 million to -$44.02 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 Food Products industry and the overall market, DIAMOND FOODS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DIAMOND FOODS INC is rather low; currently it is at 20.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -21.20% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 59.65%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1446.66% compared to the year-earlier quarter. 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.