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) -- First Marblehead Corporation (NYSE: FMD) 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 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 Consumer Finance industry. The net income has significantly decreased by 189.2% when compared to the same quarter one year ago, falling from $9.86 million to -$8.79 million.
- FIRST MARBLEHEAD CORP 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, FIRST MARBLEHEAD CORP continued to lose money by earning -$0.33 versus -$2.19 in the prior year. For the next year, the market is expecting a contraction of 36.4% in earnings (-$0.45 versus -$0.33).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Consumer Finance industry and the overall market, FIRST MARBLEHEAD CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- FMD, with its decline in revenue, slightly underperformed the industry average of 4.0%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
-- Written by a member of TheStreet Ratings Staff