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) -- Ares Commercial Real Estate (NYSE: ACRE) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.
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- ACRE has underperformed the S&P 500 Index, declining 19.84% 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.
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARES COMMERCIAL REAL ESTATE underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 46.34% is the gross profit margin for ARES COMMERCIAL REAL ESTATE which we consider to be strong. Regardless of ACRE'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 18.27% trails the industry average.
- ARES COMMERCIAL REAL ESTATE 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, ARES COMMERCIAL REAL ESTATE increased its bottom line by earning $0.73 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($0.86 versus $0.73).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 204.3% when compared to the same quarter one year prior, rising from $1.08 million to $3.29 million.