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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.
Highlights from the ratings report include:
- OPLK 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 7.77, which clearly demonstrates the ability to cover short-term cash needs.
- The revenue fell significantly faster than the industry average of 21.4%. Since the same quarter one year prior, revenues fell by 17.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for OPLINK COMMUNICATIONS INC is currently lower than what is desirable, coming in at 34.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.50% significantly trails the industry average.
- Net operating cash flow has significantly decreased to $4.94 million or 69.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
Oplink Communications, Inc., together with its subsidiaries, designs, manufactures, and sells optical networking components and subsystems worldwide. The company has a P/E ratio of 9.4, below the average electronics industry P/E ratio of 9.5 and below the S&P 500 P/E ratio of 17.7. Oplink has a market cap of $247.3 million and is part of the
industry. Shares are down 21.3% year to date as of the close of trading on Wednesday.
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-- Written by a member of TheStreet Ratings Staff
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.