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) -- Beazer Homes USA (NYSE: BZH) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and poor profit margins.
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- The debt-to-equity ratio is very high at 6.44 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Net operating cash flow has decreased to -$113.88 million or 30.21% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for BEAZER HOMES USA INC is rather low; currently it is at 18.65%. Regardless of BZH'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 -1.75% trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Durables industry and the overall market, BEAZER HOMES USA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.