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) -- Guidance Software (Nasdaq:GUID) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share.
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- 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 Software industry. The net income has significantly decreased by 81.5% when compared to the same quarter one year ago, falling from -$3.60 million to -$6.53 million.
- 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 Software industry and the overall market, GUIDANCE SOFTWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to -$1.98 million or 18.87% 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.
- GUIDANCE SOFTWARE INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, GUIDANCE SOFTWARE INC reported poor results of -$0.09 versus -$0.08 in the prior year. This year, the market expects an improvement in earnings (-$0.08 versus -$0.09).
- The gross profit margin for GUIDANCE SOFTWARE INC is rather high; currently it is at 65.20%. Regardless of GUID's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GUID's net profit margin of -24.02% significantly underperformed when compared to the industry average.
-- Written by a member of TheStreet Ratings Staff
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