The following ratings changes were generated on Thursday, Feb. 12
We've downgraded communications technology company
from hold to sell, driven by its deteriorating net income, disappointing return on equity, decline in the stock price during the past year and feeble growth in its earnings per share.
Net income fell from $9.6 million in the year-ago quarter to -$134 million in the most recent quarter, significantly underperforming both the
and the communications equipment industry. Return on equity also greatly decreased, a signal of major weakness within the corporation. Earnings per share declined steeply, though the consensus estimate suggests that the company's two-year pattern of declining EPS should reverse in the coming year. Arris Group's debt-to-equity ratio of 0.3 is low but is higher than the industry average. Its 3.3 quick ratio is very high and demonstrated very strong liquidity.
Shares are down 22.6% over the past year, in part due to the market's overall decline, which was actually deeper. However, the fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
We've downgraded robot maker
from hold to sell, driven by its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, disappointing return on equity and premium valuation.
Net income fell 73.8% compared with the year-ago quarter, to $5.4 million from $20.7 million, and ROE is also down, underperforming the industry and the S&P 500. iRobot experienced a steep decline in EPS of 74.1% in the most recent quarter compared with the year-ago quarter, and we expect the company's yearlong pattern of declining EPS to continue in the coming year.
Shares have tumbled 56.3% over the past year, underperforming the S&P 500, but don't assume that it can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, iRobot is still more expensive than most of the other companies in its industry.
, which develops and supplies custom-designed human interface solutions that enable people to interact with various electronic devices, from hold to buy. This rating is driven by the company's robust revenue growth, impressive record of earnings per share growth, increase in net income, good cash flow from operations and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
Revenue rose by 43.5%, outperforming the industry average of 14.5% growth and helping to boos EPS. The company has demonstrated a pattern of positive earnings per share growth over the past two years, and we feel that this trend should continue. Net income increased by 49.3%, from $14.2 million in the year-ago quarter to $21.2 million in the most recent quarter, significantly outperforming the S&P 500 and the computers and peripherals industry. Net operating cash flow increased by 85.3% to $39.4 million.
Shares surged by 34.8% over the past year, outperforming the S&P 500. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry, but the other strengths this company shows justify the higher price levels.
( TKLC), which engages in the design, development, manufacture, marketing, sale and support of telecommunications products and services, from hold to buy. This rating is driven by the company's revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company's 12-month moving cash flow deteriorated on a sequential basis in the fourth quarter.
Revenue increased by 4% compared with the same quarter last year, helping to boost EPS, which rose by 35.7%. The company has demonstrated a pattern of positive earnings per share growth over the past two years, and we feel that this trend should continue. Net income rose 33.2% compared with the year-ago quarter, from $10.4 million to $13.9 million, significantly outperforming the S&P 500 and the communications equipment industry. Tekelec's gross profit margin of 71.8% is very high, having increased since the same quarter last year, and its net profit margin of 11.6% is above the industry average. The company has no debt to speak of, and it maintains an adequate quick ratio of 1.2, which illustrates its ability to avoid short-term cash problems.
Vina Concha y Toro
, which produces and exports wines in Chile and internationally, from hold to buy. This rating is driven by the company's its solid stock price performance, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Revenue fell by 14.8% compared with the same quarter last year, underperforming the industry average. ROE improved slightly, which can be construed as a modest strength in the organization, underperforming the industry average but outperforming the S&P 500. Vina Concha y Toro's gross profit margin of 38.9% is strong, though it has decreased from the year-ago quarter. Its net profit margin of 11.8% trails the industry average. EPS fell by 26.1% in the most recent quarter compared with the year-ago quarter.
Vina Concha y Toro's share price has not changed much compared with where it was trading a year ago, in part due to the relatively weak year-over-year performance of the overall market. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
Other ratings changes included
( SNWL) and
( SMTL), both downgraded from hold to sell.
All ratings changes generated on Feb. 12 are listed below.
Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates. While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows. However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company. For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.