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, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.
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Highlights from the ratings report include:
- OPLK's revenue growth trails the industry average of 15.7%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
- 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 7.34, which clearly demonstrates the ability to cover short-term cash needs.
- 35.30% is the gross profit margin for OPLINK COMMUNICATIONS INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, OPLK's net profit margin of 4.64% significantly trails the industry average.
- 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 28.2% when compared to the same quarter one year ago, falling from $2.86 million to $2.05 million.
- 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 Communications Equipment industry and the overall market, OPLINK COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
Oplink Communications, Inc. designs, manufactures, and sells optical networking components and subsystems worldwide. The company also provides design, integration, and optical manufacturing solutions. The company has a P/E ratio of 82.4, above the S&P 500 P/E ratio of 17.7. Oplink has a market cap of $313.5 million and is part of the technology sector and electronics industry. Shares are up 5.8% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff
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