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) -- Layne Christensen Company (Nasdaq: LAYN) 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 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 Construction & Engineering industry. The net income has significantly decreased by 211.4% when compared to the same quarter one year ago, falling from -$24.03 million to -$74.82 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 Construction & Engineering industry and the overall market, LAYNE CHRISTENSEN CO's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for LAYNE CHRISTENSEN CO is rather low; currently it is at 17.19%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -32.24% is significantly below that of the industry average.
- LAYNE CHRISTENSEN CO 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LAYNE CHRISTENSEN CO continued to lose money by earning -$0.62 versus -$2.89 in the prior year. For the next year, the market is expecting a contraction of 127.4% in earnings (-$1.41 versus -$0.62).
- In its most recent trading session, LAYN 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. 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.