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 (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
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Highlights from the ratings report include:
- 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 4.17, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for COMMTOUCH SOFTWARE LTD is currently very high, coming in at 85.20%. 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 14.20% trails the industry average.
- Net operating cash flow has decreased to $1.39 million or 25.53% 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.
- 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. When compared to other companies in the Internet Software & Services industry and the overall market, COMMTOUCH SOFTWARE LTD's return on equity is below that of both the industry average and the S&P 500.
Commtouch Software Ltd., together with its subsidiary, provides messaging, antivirus, and Web security solutions to OEM customers, enterprises, and service providers primarily in Israel, North America, Europe, and Asia. The company has a P/E ratio of 13.1, below the average computer software & services industry P/E ratio of 13.8 and below the S&P 500 P/E ratio of 17.7. Commtouch Software has a market cap of $60.4 million and is part of the
industry. Shares are down 23.7% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff
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