Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- IXYS Corporation (Nasdaq: IXYS) has been downgraded by TheStreet Ratings from buy to hold. The company's strongest point has been its very decent return on equity which we feel should persist. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and relatively poor performance when compared with the S&P 500 during the past year.
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- Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.1%. Since the same quarter one year prior, revenues fell by 12.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- IXYS CORP 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, IXYS CORP reported lower earnings of $0.24 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus $0.24).
- In its most recent trading session, IXYS 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, IXYS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for IXYS CORP is currently lower than what is desirable, coming in at 29.35%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.78% significantly trails the industry average.