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) -- Semtech Corporation (Nasdaq: SMTC) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
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- 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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 1707.0% when compared to the same quarter one year ago, falling from $13.12 million to -$210.81 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 Semiconductors & Semiconductor Equipment industry and the overall market, SEMTECH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $30.60 million or 13.04% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, SEMTECH CORP has marginally lower results.
- The share price of SEMTECH CORP has not done very well: it is down 23.71% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- SEMTECH 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SEMTECH CORP swung to a loss, reporting -$2.44 versus $0.62 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus -$2.44).