NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. 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 premium valuation.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 34.5%. 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.
- ARUN 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 this, the company maintains a quick ratio of 2.67, which clearly demonstrates the ability to cover short-term cash needs.
- ARUBA NETWORKS 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. 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, ARUBA NETWORKS INC turned its bottom line around by earning $0.59 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.59).
- 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 Communications Equipment industry. The net income has significantly decreased by 301.8% when compared to the same quarter one year ago, falling from -$2.83 million to -$11.38 million.
- The share price of ARUBA NETWORKS INC has not done very well: it is down 7.89% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
Aruba Networks, Inc. provides next-generation network access solutions for the mobile enterprises worldwide. The company has a P/E ratio of 35.5, below the average computer hardware industry P/E ratio of 39.9 and above the S&P 500 P/E ratio of 17.7. Aruba has a market cap of $2.48 billion and is part of the
industry. Shares are up 33.1% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet Ratings Staff