NEW YORK ( TheStreet) -- Stanley Furniture Company (Nasdaq: STLY) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.
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- 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 Household Durables industry. The net income has significantly decreased by 109.6% when compared to the same quarter one year ago, falling from $36.86 million to -$3.53 million.
- 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 Household Durables industry and the overall market, STANLEY FURNITURE CO INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for STANLEY FURNITURE CO INC is currently extremely low, coming in at 11.27%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -14.60% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$3.76 million or 110.74% 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.
- In its most recent trading session, STLY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.