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) -- Geeknet (Nasdaq: GKNT) 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, poor profit margins and generally disappointing historical performance in the stock itself.
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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 Internet & Catalog Retail industry. The net income has decreased by 16.3% when compared to the same quarter one year ago, dropping from $6.06 million to $5.07 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, GEEKNET INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $12.61 million or 46.11% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The gross profit margin for GEEKNET INC is rather low; currently it is at 20.37%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 6.81% is above that of the industry average.
- GKNT has underperformed the S&P 500 Index, declining 8.09% from its price level of one year ago. 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.