Rating Change #9
VeriFone Systems Inc (PAY) 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, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow.
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Highlights from the ratings report include:
- PAY's very impressive revenue growth greatly exceeded the industry average of 2.5%. Since the same quarter one year prior, revenues leaped by 63.7%. 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.
- 48.10% is the gross profit margin for VERIFONE SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PAY's net profit margin of 0.70% significantly trails the industry average.
- Net operating cash flow has decreased to $30.75 million or 19.95% 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.
- The share price of VERIFONE SYSTEMS INC has not done very well: it is down 19.35% 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.