NEW YORK (TheStreet) -- DSP Group (Nasdaq:DSPG) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 45.1% when compared to the same quarter one year prior, rising from -$8.79 million to -$4.82 million.
- DSPG 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. To add to this, DSPG has a quick ratio of 2.05, which demonstrates the ability of the company to cover short-term liquidity needs.
- DSP GROUP INC has improved earnings per share by 44.7% 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, DSP GROUP INC reported poor results of -$0.70 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($0.09 versus -$0.70).
- The gross profit margin for DSP GROUP INC is currently lower than what is desirable, coming in at 32.10%. Regardless of DSPG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DSPG's net profit margin of -12.60% significantly underperformed when compared to the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, DSP GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet RatingsStaff
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