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) -- Datawatch Corporation (Nasdaq: DWCH) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and disappointing return on equity.
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- DATAWATCH CORP 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, DATAWATCH CORP swung to a loss, reporting -$0.60 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 5.0% in earnings (-$0.63 versus -$0.60).
- 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 Software industry. The net income has significantly decreased by 2428.8% when compared to the same quarter one year ago, falling from -$0.22 million to -$5.61 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 Software industry and the overall market, DATAWATCH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for DATAWATCH CORP is currently very high, coming in at 79.12%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, DWCH's net profit margin of -63.73% significantly underperformed when compared to the industry average.
- Compared to its closing price of one year ago, DWCH's share price has jumped by 126.94%, exceeding the performance of the broader market during that same time frame. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.