PhotoMedex Inc Stock Downgraded (PHMD)

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) -- PhotoMedex (Nasdaq: PHMD) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

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Highlights from the ratings report include:
  • PHOTOMEDEX 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, PHOTOMEDEX INC reported lower earnings of $0.88 versus $1.08 in the prior year. For the next year, the market is expecting a contraction of 172.7% in earnings (-$0.64 versus $0.88).
  • 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 Health Care Equipment & Supplies industry. The net income has significantly decreased by 205.4% when compared to the same quarter one year ago, falling from $7.09 million to -$7.48 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 Health Care Equipment & Supplies industry and the overall market, PHOTOMEDEX 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 -$10.67 million or 265.31% 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 37.76%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 217.64% compared to the year-earlier 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.

PhotoMedex, Inc., a skin health company, provides integrated disease management and aesthetic solutions to dermatologists, professional aestheticians, and consumers in North America, the Asia Pacific, Europe, and South America. PhotoMedex has a market cap of $174.9 million and is part of the health care sector and health services industry. Shares are down 29.1% year to date as of the close of trading on Friday.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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