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 increase in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
Highlights from the ratings report include:
- In its most recent trading session, CTCH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, COMMTOUCH SOFTWARE LTD's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for COMMTOUCH SOFTWARE LTD is currently very high, coming in at 85.00%. Regardless of CTCH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.50% trails the industry average.
- 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 3.43, which clearly demonstrates the ability to cover short-term cash needs.
- The revenue growth came in higher than the industry average of 20.8%. Since the same quarter one year prior, revenues rose by 35.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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 13.5, below the average internet industry P/E ratio of 17.1 and below the S&P 500 P/E ratio of 17.7. Commtouch Software has a market cap of $76.4 million and is part of the
industry. Shares are down 12.6% year to date as of the close of trading on Tuesday.
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