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Blackbaud Inc. Stock Downgraded (BLKB)

NEW YORK ( TheStreet) -- Blackbaud (Nasdaq: BLKB) 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, 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 a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 9.3%. 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.
  • BLKB 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 BLKB's debt-to-equity ratio is low, the quick ratio, which is currently 0.61, displays a potential problem in covering short-term cash needs.
  • Net operating cash flow has significantly decreased to $3.99 million or 77.24% 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 share price of BLACKBAUD INC has not done very well: it is down 8.18% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

Blackbaud, Inc. provides software and related services for nonprofit organizations. The company has a P/E ratio of 40.5, below the average computer software & services industry P/E ratio of 41.2 and above the S&P 500 P/E ratio of 17.7. Blackbaud has a market cap of $1.17 billion and is part of the technology sector and computer software & services industry. Shares are down 6.7% year to date as of the close of trading on Friday.

You can view the full Blackbaud Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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