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 generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity and feeble growth in its earnings per share.
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- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.67%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 82.60% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- 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 83.4% when compared to the same quarter one year ago, falling from $6.49 million to $1.08 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 Household Durables industry and the overall market, SKULLCANDY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 107.6% in earnings (-$0.07 versus $0.92).
- The revenue fell significantly faster than the industry average of 28.8%. Since the same quarter one year prior, revenues fell by 29.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
