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) -- KT Corporation (NYSE: KT) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, poor profit margins and disappointing return on equity.
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- KT CORP's earnings per share declined by 27.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, KT CORP reported lower earnings of $2.09 versus $2.26 in the prior year. For the next year, the market is expecting a contraction of 11.5% in earnings ($1.85 versus $2.09).
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 42.1% when compared to the same quarter one year ago, falling from $215.53 million to $124.85 million.
- The gross profit margin for KT CORP is rather low; currently it is at 16.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.81% trails that of the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, KT CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The debt-to-equity ratio is somewhat low, currently at 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
-- Written by a member of TheStreet Ratings Staff