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NEW YORK (TheStreet) -- William Lyon Homes (WLH) has been downgraded by TheStreet Ratings from Hold to Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate WILLIAM LYON HOMES (WLH) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, poor profit margins and feeble growth in its earnings per share."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Household Durables industry. The net income has significantly decreased by 25.4% when compared to the same quarter one year ago, falling from $7.56 million to $5.64 million.
- The debt-to-equity ratio is very high at 2.28 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- The gross profit margin for WILLIAM LYON HOMES is rather low; currently it is at 19.53%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.72% trails that of the industry average.
- WILLIAM LYON HOMES's earnings per share declined by 29.2% in the most recent quarter compared to 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, WILLIAM LYON HOMES increased its bottom line by earning $4.01 versus $2.35 in the prior year. For the next year, the market is expecting a contraction of 60.0% in earnings ($1.60 versus $4.01).
- In its most recent trading session, WLH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
- You can view the full analysis from the report here: WLH Ratings Report