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) -- Ignite Restaurant Group (Nasdaq: IRG) 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, weak operating cash flow and generally high debt management risk.
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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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 144.9% when compared to the same quarter one year ago, falling from $5.49 million to -$2.46 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 Hotels, Restaurants & Leisure industry and the overall market, IGNITE RESTAURANT GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for IGNITE RESTAURANT GROUP INC is currently extremely low, coming in at 10.07%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.07% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $6.87 million or 52.34% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- IRG's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.13 is very low and demonstrates very weak liquidity.