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) -- Skullcandy (Nasdaq: SKUL) 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, generally disappointing historical performance in the stock itself 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 Household Durables industry. The net income has significantly decreased by 109.3% when compared to the same quarter one year ago, falling from $6.81 million to -$0.64 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. When compared to other companies in the Household Durables industry and the overall market, SKULLCANDY INC's return on equity is below that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.59%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 108.33% 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.
- SKULLCANDY INC has experienced 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, SKULLCANDY INC increased its bottom line by earning $0.92 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 90.2% in earnings ($0.09 versus $0.92).
- The revenue fell significantly faster than the industry average of 23.1%. Since the same quarter one year prior, revenues fell by 29.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.