NEW YORK (
-- Commtouch Software
) 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 reasonable valuation levels. 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 weak operating cash flow.
Highlights from the ratings report include:
- Net operating cash flow has significantly decreased to $0.80 million or 56.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Internet Software & Services industry. The net income has significantly decreased by 47.6% when compared to the same quarter one year ago, falling from $3.18 million to $1.67 million.
- CTCH 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 3.20, which clearly demonstrates the ability to cover short-term cash needs.
- The revenue growth came in higher than the industry average of 22.3%. Since the same quarter one year prior, revenues rose by 34.0%. 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.
Commtouch Software Ltd., together with its subsidiary, Commtouch Inc., develops and provides messaging and Web security solutions to original equipment manufacturer partners and enterprises. The company has a P/E ratio of 16.3, below the average internet industry P/E ratio of 19.9 and equal to the S&P 500 P/E ratio of 16.2. Commtouch Software has a market cap of $84.1 million and is part of the
industry. The stock last closed at $3.58 and the average volume of shares traded for Commtouch Software has been 32,000 shares per day over the past 30 days. Shares are down 5.9% year to date as of the close of trading on Monday.
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