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) -- First Financial Northwest (Nasdaq: FFNW) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
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- The gross profit margin for FIRST FINANCIAL NORTHWEST is rather high; currently it is at 64.50%. 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 -7.70% is in-line with the industry average.
- FFNW, with its decline in revenue, underperformed when compared the industry average of 2.7%. Since the same quarter one year prior, revenues fell by 21.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, FIRST FINANCIAL NORTHWEST underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to $3.49 million or 81.46% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet Ratings Staff