NEW YORK (
-- Commtouch Software
) has been upgraded by TheStreet Ratings from hold to buy. 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, reasonable valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
Highlights from the ratings report include:
- 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. 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 88.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 31.00% is above that of 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 3.20, which clearly demonstrates the ability to cover short-term cash needs.
- The revenue growth came in higher than the industry average of 22.0%. 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 15.8, below the average internet industry P/E ratio of 19.3 and below the S&P 500 P/E ratio of 16.7. Commtouch Software has a market cap of $81.8 million and is part of the
industry. Shares are down 6.4% year to date as of the close of trading on Monday.
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