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) -- Royal Bancshares of Pennsylvania (Nasdaq: RBPAA) has been downgraded by TheStreet Ratings from hold to sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.
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- This stock has increased by 28.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, ROYAL BANCSHARES/PA underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for ROYAL BANCSHARES/PA is currently very high, coming in at 87.56%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, RBPAA's net profit margin of 18.90% significantly trails the industry average.
- Net operating cash flow has significantly increased by 51.71% to $3.50 million when compared to the same quarter last year. In addition, ROYAL BANCSHARES/PA has also vastly surpassed the industry average cash flow growth rate of -42.37%.