While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold." NutriSystem (NASDAQ: NTRI) shares currently have a dividend yield of 7.90%. Nutrisystem, Inc., together with its subsidiaries, provides weight management products and services in the United States. The company offers nutritionally balanced weight loss programs designed for women, men, and seniors. The company has a P/E ratio of 222.25. The average volume for NutriSystem has been 256,600 shares per day over the past 30 days. NutriSystem has a market cap of $254.5 million and is part of the diversified services industry. Shares are up 8.8% year to date as of the close of trading on Friday. TheStreet Ratings rates NutriSystem as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet & Catalog Retail industry. The net income increased by 85.7% when compared to the same quarter one year prior, rising from -$4.48 million to -$0.64 million.
- Net operating cash flow has increased to $22.40 million or 48.60% when compared to the same quarter last year. In addition, NUTRISYSTEM INC has also vastly surpassed the industry average cash flow growth rate of -14.28%.
- NTRI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.87 is somewhat weak and could be cause for future problems.
- NTRI has underperformed the S&P 500 Index, declining 16.22% 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.
- 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. Compared to other companies in the Internet & Catalog Retail industry and the overall market, NUTRISYSTEM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full NutriSystem Ratings Report.
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 11.2%. 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 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 Capital Markets industry and the overall market on the basis of return on equity, HORIZON TECHNOLOGY FINANCE underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to -$18.39 million or 681.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Horizon Technology Finance Corp BDC Ratings Report.
- The revenue growth came in higher than the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 14.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 33.4% when compared to the same quarter one year prior, rising from -$50.33 million to -$33.51 million.
- EAGLE ROCK ENERGY PARTNRS LP has improved earnings per share by 42.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EAGLE ROCK ENERGY PARTNRS LP swung to a loss, reporting -$1.11 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$1.11).
- The debt-to-equity ratio of 1.25 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, EROC maintains a poor quick ratio of 0.78, which illustrates the inability to avoid short-term cash problems.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EAGLE ROCK ENERGY PARTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Eagle Rock Energy Partners Ratings Report.
- Our dividend calendar.