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) -- Vimicro International (Nasdaq: VIMC) 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, poor profit margins and feeble growth in its earnings per share.
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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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 197.0% when compared to the same quarter one year ago, falling from $2.20 million to -$2.14 million.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, VIMICRO INTL CORP -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for VIMICRO INTL CORP -ADR is currently lower than what is desirable, coming in at 33.18%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.96% is significantly below that of the industry average.
- VIMICRO INTL CORP -ADR 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, VIMICRO INTL CORP -ADR swung to a loss, reporting -$0.30 versus $0.05 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.30).
- Compared to its closing price of one year ago, VIMC's share price has jumped by 140.00%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in VIMC do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.