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) -- Netflix (Nasdaq:NFLX) has been reiterated by TheStreet Ratings as a hold with a ratings score of C . The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
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- NFLX's revenue growth trails the industry average of 20.4%. Since the same quarter one year prior, revenues rose by 10.1%. 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.
- The gross profit margin for NETFLIX INC is currently very high, coming in at 74.90%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 0.80% trails the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Internet & Catalog Retail industry and the overall market, NETFLIX INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 87.7% when compared to the same quarter one year ago, falling from $62.46 million to $7.68 million.
--Written by a member of TheStreet Ratings Staff.Holiday Special: Subscribe to Action Alerts PLUS to see how Jim Cramer trades his $2.5 Million+ portfolio for 51% off the list price. Your first 14-days are FREE: Sign up today to get e-mail alerts before every trade
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