Epiq Systems Inc. Stock Downgraded (EPIQ)

NEW YORK (TheStreet) -- Epiq Systems (Nasdaq:EPIQ) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

• 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 Software industry. The net income has significantly decreased by 29.2% when compared to the same quarter one year ago, falling from $3.92 million to $2.77 million.
• Net operating cash flow has significantly decreased to -$1.33 million or 112.01% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
• The gross profit margin for EPIQ SYSTEMS INC is rather high; currently it is at 62.10%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EPIQ's net profit margin of 3.70% significantly trails the industry average.
• The revenue growth came in higher than the industry average of 1.4%. Since the same quarter one year prior, revenues rose by 12.2%. 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.

EPIQ Systems, Inc. provides integrated technology solutions for the legal profession primarily in the United States. The company's solutions streamline the administration of bankruptcy, litigation, financial transactions, and regulatory compliance matters. The company has a P/E ratio of 27.6, below the average computer software & services industry P/E ratio of 34.6 and above the S&P 500 P/E ratio of 17.7. Epiq Systems has a market cap of $440.4 million and is part of the technology sector and computer software & services industry. Shares are down 11.3% year to date as of the close of trading on Monday.

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• Epiq Systems Inc. Growth Rates

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