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 revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. 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 disappointing return on equity.
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Highlights from the ratings report include:
- CTCH's revenue growth trails the industry average of 33.3%. Since the same quarter one year prior, revenues rose by 17.8%. 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.
- 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
- 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. In comparison to the other companies in the Internet Software & Services industry and the overall market, COMMTOUCH SOFTWARE LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to -$1.56 million or 169.85% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
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 24.4, above the S&P 500 P/E ratio of 17.7. Commtouch Software has a market cap of $89.2 million and is part of the technology sector and computer software & services industry. Shares are up 18.1% year to date as of the close of trading on Thursday.
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-- Written by a member of TheStreet Ratings Staff
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