NEW YORK (TheStreet) -- Edgewater Technology (Nasdaq:EDGW) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- EDGW's revenue growth has slightly outpaced the industry average of 8.1%. Since the same quarter one year prior, revenues rose by 17.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- EDGW's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, EDGW has a quick ratio of 1.85, which demonstrates the ability of the company to cover short-term liquidity needs.
- EDGEWATER TECHNOLOGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EDGEWATER TECHNOLOGY INC reported poor results of -$1.93 versus -$0.32 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$1.93).
- 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, EDGEWATER TECHNOLOGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $2.93 million or 21.06% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
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