NEW YORK (TheStreet) -- MicroStrategy (Nasdaq:MSTR) has been downgraded by TheStreet Ratings from buy 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- MSTR's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 18.9%. 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.
- MSTR 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for MICROSTRATEGY INC is currently very high, coming in at 77.60%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MSTR's net profit margin of 0.20% significantly trails the industry average.
- 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. In comparison to the other companies in the Software industry and the overall market, MICROSTRATEGY INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has decreased to $20.77 million or 26.35% 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.
-- Written by a member of TheStreet Ratings Staff
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