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) -- Ellington Financial (NYSE: EFC) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share.
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- ELLINGTON FINANCIAL LLC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ELLINGTON FINANCIAL LLC increased its bottom line by earning $5.32 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 43.6% in earnings ($3.00 versus $5.32).
- The gross profit margin for ELLINGTON FINANCIAL LLC is rather high; currently it is at 69.20%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, EFC's net profit margin of 219.42% significantly outperformed against the industry.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Capital Markets industry average. The net income increased by 25.8% when compared to the same quarter one year prior, rising from $32.06 million to $40.34 million.
- Investors have driven up the company's shares by 30.66% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the future course of this stock, we feel that the risks involved in investing in EFC do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
- 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. In comparison to the other companies in the Capital Markets industry and the overall market, ELLINGTON FINANCIAL LLC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff