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) -- NeoPhotonics (NYSE: NPTN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins and feeble growth in its earnings per share.
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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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 160.7% when compared to the same quarter one year ago, falling from -$3.66 million to -$9.53 million.
- The gross profit margin for NEOPHOTONICS CORP is currently lower than what is desirable, coming in at 26.67%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -12.71% is significantly below that of the industry average.
- NEOPHOTONICS 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, NEOPHOTONICS CORP reported poor results of -$0.68 versus -$0.64 in the prior year. This year, the market expects an improvement in earnings (-$0.43 versus -$0.68).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, NEOPHOTONICS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.