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) -- Discovery Laboratories (Nasdaq: DSCO) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself.
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- The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 7.28, which clearly demonstrates the ability to cover short-term cash needs.
- DISCOVERY LABORATORIES INC reported flat earnings per share in the most recent quarter. 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, DISCOVERY LABORATORIES INC continued to lose money by earning -$0.85 versus -$1.00 in the prior year. This year, the market expects an improvement in earnings (-$0.40 versus -$0.85).
- DSCO, with its very weak revenue results, has greatly underperformed against the industry average of 14.9%. Since the same quarter one year prior, revenues plummeted by 62.6%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- In its most recent trading session, DSCO 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. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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 Biotechnology industry. The net income has significantly decreased by 72.1% when compared to the same quarter one year ago, falling from -$6.82 million to -$11.73 million.