TSC Ratings' Updates: Ctrip.com

We've downgraded Polycom(PLCM Quote), which provides communications solutions to enterprise and public sector customers to enable voice, video and content communications, from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a decline in the stock price during the past year and weak operating cash flow.

Revenue rose by 14.9% since the same quarter a year ago but does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share. Polycom has a debt-to-equity ratio of zero and a quick ratio of 1.85, which demonstrates the ability of the company to cover short-term liquidity needs. Its gross profit margin is rather high at 62.2%, having increased from the same quarter last year, but its net profit margin of 6.5% significantly trails the industry average. Net operating cash flow has declined marginally to $40.4 million, or 3.82% when compared with the same quarter last year. Despite a decrease in cash flow, Polycom is still fairing well by exceeding its industry average cash flow growth rate of -31.76%.

Shares are off 35.1% compared with a year ago, but this decline was actually not as bad as the broader market plunge during that same time frame. Don't assume that it can now be tagged as cheap and attractive, though. Based on its current price in relation to its earnings, Polycom is still more expensive than most of the other companies in its industry.