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) -- Fuel Systems Solutions (Nasdaq: FSYS) 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, generally disappointing historical performance in the stock itself and poor profit margins.
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- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Auto Components industry and the overall market, FUEL SYSTEMS SOLUTIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, FSYS 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 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.
- The gross profit margin for FUEL SYSTEMS SOLUTIONS INC is currently lower than what is desirable, coming in at 26.06%. Regardless of FSYS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.05% trails the industry average.
- FUEL SYSTEMS SOLUTIONS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FUEL SYSTEMS SOLUTIONS INC swung to a loss, reporting -$0.78 versus $0.26 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus -$0.78).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Auto Components industry. The net income increased by 267.0% when compared to the same quarter one year prior, rising from -$0.62 million to $1.03 million.