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) -- EXFO (Nasdaq:EXFO) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its 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 feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
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- EXFO's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.68, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for EXFO INC is rather high; currently it is at 62.20%. Regardless of EXFO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EXFO's net profit margin of 0.06% is significantly lower than the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, EXFO INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $2.05 million or 84.87% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- 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. Exclusive Offer: Jim Cramer's 'go-to' small/mid-cap guru Bryan Ashenberg only buys stocks he thinks could return 50-100% See his top picks for 14-days FREE.
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