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) -- Ironwood Pharmaceuticals (Nasdaq: IRWD) 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 and deteriorating net income.
- 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.
- IRONWOOD PHARMACEUTICALS 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 two years. We anticipate that this should continue in the coming year. During the past fiscal year, IRONWOOD PHARMACEUTICALS INC reported poor results of -$0.71 versus -$0.66 in the prior year. For the next year, the market is expecting a contraction of 190.8% in earnings (-$2.07 versus -$0.71).
- 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 Biotechnology industry. The net income has significantly decreased by 528.8% when compared to the same quarter one year ago, falling from -$6.97 million to -$43.86 million.
- IRWD, with its decline in revenue, underperformed when compared the industry average of 5.6%. Since the same quarter one year prior, revenues fell by 16.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Biotechnology industry and the overall market, IRONWOOD PHARMACEUTICALS INC'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