NEW YORK (

TheStreet

)

-- NCI

(Nasdaq:

NCIT

) 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 attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to -$7.25 million or 166.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for NCI INC is currently extremely low, coming in at 11.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.80% trails that of the industry average.
  • NCI INC has improved earnings per share by 5.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NCI INC increased its bottom line by earning $1.72 versus $1.61 in the prior year. For the next year, the market is expecting a contraction of 0.3% in earnings ($1.72 versus $1.72).
  • NCIT's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NCIT has a quick ratio of 1.91, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The revenue growth came in higher than the industry average of 14.7%. Since the same quarter one year prior, revenues rose by 30.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

NCI, Inc. provides information technology (IT), engineering, logistics, and professional services and solutions to federal government agencies. The company has a P/E ratio of 12.8, equal to the average computer software & services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. NCI has a market cap of $188.9 million and is part of the

technology

sector and

computer software & services

industry. Shares are down 3.5% year to date as of the close of trading on Thursday.

You can view the full

NCI Ratings Report

or get investment ideas from our

investment research center

.

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