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) -- Durect Corporation (Nasdaq: DRRX) 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 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 Pharmaceuticals industry. The net income has significantly decreased by 116.8% when compared to the same quarter one year ago, falling from $30.83 million to -$5.18 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 Pharmaceuticals industry and the overall market, DURECT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- DURECT 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, DURECT CORP turned its bottom line around by earning $0.19 versus -$0.21 in the prior year. For the next year, the market is expecting a contraction of 202.6% in earnings (-$0.20 versus $0.19).
- DRRX, with its very weak revenue results, has greatly underperformed against the industry average of 7.2%. Since the same quarter one year prior, revenues plummeted by 89.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to its closing price of one year ago, DRRX's share price has jumped by 115.06%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in DRRX do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
-- Written by a member of TheStreet Ratings Staff