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) -- Penn National Gaming (Nasdaq: PENN) 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, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow.
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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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 4491.3% when compared to the same quarter one year ago, falling from $20.24 million to -$888.75 million.
- The debt-to-equity ratio of 1.39 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, PENN maintains a poor quick ratio of 0.96, which illustrates the inability to avoid short-term cash problems.
- 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 Hotels, Restaurants & Leisure industry and the overall market, PENN NATIONAL GAMING INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for PENN NATIONAL GAMING INC is currently lower than what is desirable, coming in at 31.71%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -137.85% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $12.84 million or 92.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.