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) -- Sucampo Pharmaceuticals Inc. A (Nasdaq: SCMP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and feeble growth in the company's earnings per share.
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- The revenue growth came in higher than the industry average of 7.1%. Since the same quarter one year prior, revenues rose by 17.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for SUCAMPO PHARMACEUTICALS INC is currently very high, coming in at 94.70%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -18.58% is in-line with the industry average.
- 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. When compared to other companies in the Pharmaceuticals industry and the overall market, SUCAMPO PHARMACEUTICALS INC's return on equity is below that of both the industry average and the S&P 500.
- Currently the debt-to-equity ratio of 1.56 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, SCMP has managed to keep a strong quick ratio of 1.90, which demonstrates the ability to cover short-term cash needs.
- 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 63.1% when compared to the same quarter one year ago, falling from -$1.93 million to -$3.15 million.
-- Written by a member of TheStreet Ratings Staff