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NEW YORK (TheStreet) -- Mercantile Bank Corp. (MBWM) has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate MERCANTILE BANK CORP (MBWM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 31.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for MERCANTILE BANK CORP is currently very high, coming in at 89.27%. Regardless of MBWM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.26% trails the industry average.
- MERCANTILE BANK CORP 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, MERCANTILE BANK CORP increased its bottom line by earning $1.95 versus $1.29 in the prior year. For the next year, the market is expecting a contraction of 26.1% in earnings ($1.44 versus $1.95).
- 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 Commercial Banks industry. The net income has significantly decreased by 62.4% when compared to the same quarter one year ago, falling from $4.02 million to $1.51 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, MERCANTILE BANK CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: MBWM Ratings Report
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