Rating Change #7
Allot Communications Ltd (ALLT) 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 6.0%. Since the same quarter one year prior, revenues rose by 40.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ALLT 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 this, the company maintains a quick ratio of 5.51, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for ALLOT COMMUNICATIONS LTD is currently very high, coming in at 74.30%. Regardless of ALLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ALLT's net profit margin of 13.40% is significantly lower than the same period one year prior.
- Powered by its strong earnings growth of 66.66% and other important driving factors, this stock has surged by 29.04% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Software industry and the overall market, ALLOT COMMUNICATIONS LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.