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) -- Geeknet (Nasdaq: GKNT) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, unimpressive growth in net income, weak operating cash flow and poor profit margins.
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- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GKNT has underperformed the S&P 500 Index, declining 10.05% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry average. The net income has decreased by 10.1% when compared to the same quarter one year ago, dropping from -$2.12 million to -$2.34 million.
- Net operating cash flow has significantly decreased to -$5.96 million or 58.05% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The gross profit margin for GEEKNET INC is rather low; currently it is at 20.10%. Regardless of GKNT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GKNT's net profit margin of -11.94% significantly underperformed when compared to the industry average.
- 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 Internet & Catalog Retail industry and the overall market, GEEKNET INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff