Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet, Inc., or any of its contributors. TheStreet Ratings quantitative algorithm evaluates over 4,300 stocks on a daily basis by 32 different data factors and assigns a unique buy, sell, or hold recommendation on each stock. Click here to learn more.
"We rate PRGX GLOBAL INC (PRGX) 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 disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 IT Services industry and the overall market, PRGX GLOBAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for PRGX GLOBAL INC is currently lower than what is desirable, coming in at 31.02%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.19% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $2.92 million or 64.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- PRGX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 40.94%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 19.9%. Since the same quarter one year prior, revenues fell by 11.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: PRGX Ratings Report