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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link

.

NEW YORK (

TheStreet

)

-- Harmonic

(Nasdaq:

HLIT

) 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, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

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Highlights from the ratings report include:

  • HLIT's revenue growth trails the industry average of 23.1%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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.
  • HLIT 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 2.86, which clearly demonstrates the ability to cover short-term cash needs.
  • HARMONIC INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HARMONIC INC turned its bottom line around by earning $0.23 versus -$0.13 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus $0.23).
  • 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 Communications Equipment industry. The net income has significantly decreased by 149.1% when compared to the same quarter one year ago, falling from $4.80 million to -$2.36 million.
  • Net operating cash flow has declined marginally to $18.63 million or 9.53% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Harmonic Inc. designs, manufactures, and sells video infrastructure products and system solutions to create, prepare, and deliver broadcast and on-demand video services for televisions, personal computers, tablets and mobile devices in the United States and internationally. The company has a P/E ratio of 23.8, above the S&P 500 P/E ratio of 17.7. Harmonic has a market cap of $672.4 million and is part of the technology sector and telecommunications industry. Shares are down 9.6% year to date as of the close of trading on Thursday.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.