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F5 Networks Inc. Stock Hold Recommendation Reiterated (FFIV)

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) -- F5 Networks (Nasdaq: FFIV) 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, largely solid financial position with reasonable debt levels by most measures 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:

  • FFIV's revenue growth trails the industry average of 15.2%. Since the same quarter one year prior, revenues slightly increased by 3.1%. 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.
  • FFIV 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.37, which illustrates the ability to avoid short-term cash problems.
  • F5 NETWORKS INC's earnings per share declined by 7.0% 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, F5 NETWORKS INC increased its bottom line by earning $3.45 versus $2.97 in the prior year. This year, the market expects an improvement in earnings ($4.47 versus $3.45).
  • Net operating cash flow has decreased to $80.66 million or 20.61% 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.
  • Looking at the price performance of FFIV's shares over the past 12 months, there is not much good news to report: the stock is down 45.33%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, FFIV is still more expensive than most of the other companies in its industry.

F5 Networks, Inc. provides application delivery networking technology that secures and optimizes the delivery of network-based applications, and the security, performance, and availability of servers and other network resources. F5 has a market cap of $6.1 billion and is part of the technology sector and computer software & services industry. The company has a P/E ratio of 22.00, above the S&P 500 P/E ratio of 18.00. Shares are down 20.2% year to date as of the close of trading on Tuesday.

You can view the full F5 Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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