Dean Foods Company Stock Downgraded (DF)

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) -- Dean Foods Company (NYSE: DF) 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, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself.

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Highlights from the ratings report include:
  • 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 Food Products industry. The net income has significantly decreased by 201.3% when compared to the same quarter one year ago, falling from $56.17 million to -$56.87 million.
  • The gross profit margin for DEAN FOODS CO is rather low; currently it is at 22.29%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.55% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$130.64 million or 155.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Currently the debt-to-equity ratio of 1.87 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, DF's quick ratio is somewhat strong at 1.20, demonstrating the ability to handle short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.69%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 270.00% compared to 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.

Dean Foods Company, a food and beverage company, processes and distributes milk, other fluid dairy products, and plant-based beverages. Dean has a market cap of $1.82 billion and is part of the consumer goods sector and food & beverage industry. Shares are down 41.4% year to date as of the close of trading on Thursday.

You can view the full Dean Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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