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NEW YORK ( TheStreet) -- ReachLocal (Nasdaq: RLOC) 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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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 Media industry. The net income has significantly decreased by 840.6% when compared to the same quarter one year ago, falling from -$0.64 million to -$5.97 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Media industry and the overall market, REACHLOCAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$2.46 million or 152.25% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 2300.00% 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.
  • REACHLOCAL INC 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, REACHLOCAL INC increased its bottom line by earning $0.11 versus $0.00 in the prior year. For the next year, the market is expecting a contraction of 390.9% in earnings (-$0.32 versus $0.11).

ReachLocal, Inc. provides a suite of online marketing and reporting solutions to small and medium-sized businesses (SMBs). ReachLocal has a market cap of $286.8 million and is part of the services sector and media industry. Shares are down 44.3% year to date as of the close of trading on Thursday.

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

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