NEW YORK (TheStreet) -- Cbeyond (Nasdaq:CBEY) 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, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 260.7% when compared to the same quarter one year prior, rising from -$1.68 million to $2.69 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CBEYOND INC reported significant earnings per share improvement 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, CBEYOND INC reported poor results of -$0.27 versus -$0.06 in the prior year. This year, the market expects an improvement in earnings (-$0.13 versus -$0.27).
- CBEY's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 40.02%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, CBEYOND INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- 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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