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) -- Skechers USA (NYSE: SKX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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- SKECHERS U S A INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SKECHERS U S A INC increased its bottom line by earning $1.08 versus $0.19 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.08).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 258.1% when compared to the same quarter one year prior, rising from $3.96 million to $14.17 million.
- Powered by its strong earnings growth of 250.00% and other important driving factors, this stock has surged by 54.29% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- 44.51% is the gross profit margin for SKECHERS U S A INC which we consider to be strong. Regardless of SKX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.14% trails the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, SKECHERS U S A INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.