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) -- Anworth Mortgage Asset Corporation (NYSE: ANH) 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, weak operating cash flow, generally disappointing historical performance in the stock itself and disappointing return on equity.
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- ANWORTH MTG ASSET CORP's earnings per share declined by 16.7% 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, ANWORTH MTG ASSET CORP reported lower earnings of $0.68 versus $0.90 in the prior year. For the next year, the market is expecting a contraction of 20.6% in earnings ($0.54 versus $0.68).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income has decreased by 10.9% when compared to the same quarter one year ago, dropping from $25.81 million to $23.00 million.
- Net operating cash flow has significantly decreased to -$198.26 million or 120.56% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Looking at the price performance of ANH's shares over the past 12 months, there is not much good news to report: the stock is down 33.54%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ANWORTH MTG ASSET CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.