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) -- Exelixis (Nasdaq: EXEL) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
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- EXELIXIS 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 two years. We anticipate that this should continue in the coming year. During the past fiscal year, EXELIXIS INC swung to a loss, reporting -$0.91 versus $0.54 in the prior year. For the next year, the market is expecting a contraction of 36.3% in earnings (-$1.24 versus -$0.91).
- 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 212.7% when compared to the same quarter one year ago, falling from $46.30 million to -$52.19 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. When compared to other companies in the Biotechnology industry and the overall market, EXELIXIS 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.
- Net operating cash flow has decreased to -$38.74 million or 32.77% when compared to the same quarter last year. Despite a decrease in cash flow EXELIXIS INC is still fairing well by exceeding its industry average cash flow growth rate of -44.13%.
- The share price of EXELIXIS INC has not done very well: it is down 22.36% 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. 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.
-- Written by a member of TheStreet Ratings Staff