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) -- Skilled Healthcare Group (NYSE: SKH) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.
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- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Health Care Providers & Services industry average. The net income has decreased by 15.3% when compared to the same quarter one year ago, dropping from $6.73 million to $5.70 million.
- Net operating cash flow has significantly decreased to $11.74 million or 64.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for SKILLED HEALTHCARE GROUP INC is currently extremely low, coming in at 13.30%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 2.59% is above that of the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SKH has underperformed the S&P 500 Index, declining 11.89% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- SKILLED HEALTHCARE GROUP INC's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SKILLED HEALTHCARE GROUP INC turned its bottom line around by earning $0.57 versus -$5.49 in the prior year. This year, the market expects an improvement in earnings ($0.81 versus $0.57).
-- Written by a member of TheStreet Ratings Staff