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) -- Legg Mason (NYSE: LM) 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 and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
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- LM's revenue growth trails the industry average of 26.1%. Since the same quarter one year prior, revenues slightly increased by 7.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- In its most recent trading session, LM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- LEGG MASON 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, LEGG MASON INC reported lower earnings of $1.53 versus $1.66 in the prior year. For the next year, the market is expecting a contraction of 248.4% in earnings (-$2.27 versus $1.53).
- 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 Capital Markets industry and the overall market, LEGG MASON INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for LEGG MASON INC is rather low; currently it is at 16.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -66.54% is significantly below that of the industry average.
-- Written by a member of TheStreet Ratings Staff