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) -- Jakks Pacific Incorporated (Nasdaq: JAKK) 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, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself 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 Leisure Equipment & Products industry. The net income has significantly decreased by 496.7% when compared to the same quarter one year ago, falling from -$20.02 million to -$119.46 million.
- 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 Leisure Equipment & Products industry and the overall market, JAKKS PACIFIC INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for JAKKS PACIFIC INC is rather low; currently it is at 23.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -89.47% is significantly below that of the industry average.
- The share price of JAKKS PACIFIC INC has not done very well: it is down 16.68% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- JAKKS PACIFIC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, JAKKS PACIFIC INC swung to a loss, reporting -$4.96 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus -$4.96).
-- Written by a member of TheStreet Ratings Staff