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) -- Memsic (Nasdaq: MEMS) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.
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- MEMS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 44.43%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, MEMSIC INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 37.90% is the gross profit margin for MEMSIC INC which we consider to be strong. Regardless of MEMS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MEMS's net profit margin of -9.92% significantly underperformed when compared to the industry average.
- MEMSIC INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MEMSIC INC continued to lose money by earning -$0.04 versus -$0.27 in the prior year. For the next year, the market is expecting a contraction of 612.5% in earnings (-$0.29 versus -$0.04).
- MEMS, with its decline in revenue, underperformed when compared the industry average of 12.6%. Since the same quarter one year prior, revenues fell by 33.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
-- Written by a member of TheStreet Ratings Staff