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Brocade Communications Systems Inc Stock Upgraded (BRCD)

Editor's Note: 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

NEW YORK (TheStreet) -- Brocade Communications Systems (Nasdaq:BRCD) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 2135.4% when compared to the same quarter one year prior, rising from $1.94 million to $43.30 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although BRCD's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.46, which illustrates the ability to avoid short-term cash problems.
  • This stock has managed to rise its share value by 53.56% over the past twelve months. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • Net operating cash flow has significantly increased by 922.41% to $113.06 million when compared to the same quarter last year. In addition, BROCADE COMMUNICATIONS SYS has also vastly surpassed the industry average cash flow growth rate of -8.58%.

Brocade Communications Systems, Inc. engages in the supply of Internet protocol based Ethernet networking solutions and storage area networking (SAN) solutions. The company has a P/E ratio of 21.3, below the average computer hardware industry P/E ratio of 22 and above the S&P 500 P/E ratio of 17.7. Brocade Communications Systems has a market cap of $2.83 billion and is part of the technology sector and computer hardware industry. Shares are up 18.8% year to date as of the close of trading on Monday.

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

-- Written by a member of TheStreet Ratings Staff

Editor's Note: 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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