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) -- LATAM Airlines Group S.A (NYSE: LFL) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
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- The gross profit margin for LATAM AIRLINES GROUP SA is currently lower than what is desirable, coming in at 26.10%. It has decreased from the same quarter the previous year.
- 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. When compared to other companies in the Airlines industry and the overall market, LATAM AIRLINES GROUP SA's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The share price of LATAM AIRLINES GROUP SA has not done very well: it is down 21.31% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- LATAM AIRLINES GROUP SA 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LATAM AIRLINES GROUP SA reported lower earnings of $0.12 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus $0.12).
- The change in net income from the same quarter one year ago has significantly exceeded that of the Airlines industry average, but is less than that of the S&P 500. The net income has significantly decreased by 43.8% when compared to the same quarter one year ago, falling from $76.07 million to $42.75 million.
-- Written by a member of TheStreet Ratings Staff