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) -- Ligand Pharmaceuticals (Nasdaq: LGND) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, generally high debt management risk, disappointing return on equity and feeble growth in its earnings per share.
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- 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 77.9% when compared to the same quarter one year ago, falling from $4.81 million to $1.06 million.
- The gross profit margin for LIGAND PHARMACEUTICAL INC is currently lower than what is desirable, coming in at 33.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.79% significantly trails the industry average.
- Even though the current debt-to-equity ratio is 1.07, it is still below the industry average, suggesting that this level of debt is acceptable within the Biotechnology industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.
- 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. When compared to other companies in the Biotechnology industry and the overall market, LIGAND PHARMACEUTICAL 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.
- LIGAND PHARMACEUTICAL INC's earnings per share declined by 45.8% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LIGAND PHARMACEUTICAL INC swung to a loss, reporting -$0.14 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($0.40 versus -$0.14).
-- Written by a member of TheStreet Ratings Staff