TSC Ratings' Updates: Cablevision

We've downgraded Foundry Networks(FDRY Quote), which designs, develops, manufactures, markets and sells switching and routing solutions, from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a decline in the stock price during the past year, deteriorating net income and disappointing return on equity.

Revenue increased slightly by 4% since the same quarter one year ago, but this growth does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. Foundry has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.55, which clearly demonstrates the ability to cover short-term cash needs.

Foundry experienced a steep decline in EPS in the most recent quarter compared with the same quarter a year ago, but we feel it is poised for EPS growth in the coming year. During the past fiscal year, it increased its bottom line by earning 52 cents vs. 25 cents in the prior year, and this year, the market expects an improvement in earnings to 68 cents. The company's current return on equity has slightly decreased from the same quarter one year prior and is sigfnificantly below the industry average and the S&P 500, implying a minor weakness in the organization.

Shares are down 19.75% on the year, reflecting the market's overall decline (which was actually deeper) and the sharp decline in the company's EPS. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last 12 months, and it could be down again in the next 12. Naturally, a bull or bear market could sway the movement of this stock.