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) -- Equity Residential (NYSE: EQR) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
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- 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, EQUITY RESIDENTIAL's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for EQUITY RESIDENTIAL is rather low; currently it is at 19.20%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 59.98% has significantly outperformed against the industry average.
- The share price of EQUITY RESIDENTIAL has not done very well: it is down 9.51% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- EQUITY RESIDENTIAL 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 not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, EQUITY RESIDENTIAL increased its bottom line by earning $0.57 versus $0.15 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 66.8% when compared to the same quarter one year prior, rising from $226.14 million to $377.19 million.