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) -- Electro Scientific Industries (Nasdaq: ESIO) has been downgraded by TheStreet Ratings from buy to sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.
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- The gross profit margin for ELECTRO SCIENTIFIC INDS INC is currently extremely low, coming in at 10.05%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -74.52% is significantly below that of the industry average.
- ESIO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.71%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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 Electronic Equipment, Instruments & Components industry and the overall market, ELECTRO SCIENTIFIC INDS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- ESIO, with its decline in revenue, underperformed when compared the industry average of 6.2%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- ESIO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.17, which clearly demonstrates the ability to cover short-term cash needs.