NEW YORK (TheStreet) -- Cbeyond Communications (Nasdaq:CBEY) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as 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 deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- 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 Diversified Telecommunication Services industry and the overall market, CBEYOND INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 113.6% when compared to the same quarter one year ago, falling from $1.04 million to -$0.14 million.
- The gross profit margin for CBEYOND INC is rather high; currently it is at 66.70%. Regardless of CBEY'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 -0.10% trails the industry average.
- CBEY has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Despite the fact that CBEY's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.6%. Since the same quarter one year prior, revenues slightly increased by 7.7%. 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.
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