Semtech Corporation Stock Downgraded (SMTC)

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.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:
  • 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).

Semtech Corporation, together with its subsidiaries, designs, develops, manufactures, and markets analog and mixed signal semiconductor products. Semtech has a market cap of $1.8 billion and is part of the technology sector and electronics industry. Shares are up 3.7% year to date as of the close of trading on Monday.

You can view the full Semtech Ratings Report or get investment ideas from our investment research center.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

More from Markets

Video: Jim Cramer on Apple, Amazon, Alphabet and Nucor

Video: Jim Cramer on Apple, Amazon, Alphabet and Nucor

Jim Cramer on Apple: I Will Be Less Worried After it Reports

Jim Cramer on Apple: I Will Be Less Worried After it Reports

Dow Falls Sharply as Apple's Slump Offsets Gains in General Electric

Dow Falls Sharply as Apple's Slump Offsets Gains in General Electric

Could Spotify Be Next on Amazon's Wish List?

Could Spotify Be Next on Amazon's Wish List?

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved