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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow.
Highlights from the ratings report include:
- PLCM's revenue growth trails the industry average of 21.4%. Since the same quarter one year prior, revenues slightly increased by 6.8%. 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.
- PLCM 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. To add to this, PLCM has a quick ratio of 2.25, which demonstrates the ability of the company to cover short-term liquidity needs.
- POLYCOM INC has exprienced 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, POLYCOM INC increased its bottom line by earning $0.76 versus $0.39 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus $0.76).
- Net operating cash flow has decreased to $32.04 million or 29.73% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 59.40%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.89% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, PLCM is still more expensive than most of the other companies in its industry.
Polycom, Inc. provides communications equipment that enables businesses, telecommunications service providers, governmental and educational institutions, and healthcare customers to conduct video, voice, data, and Web communications. The company has a P/E ratio of 17.5, equal to the average telecommunications industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Polycom has a market cap of $2.03 billion and is part of the
industry. Shares are down 33.9% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet Ratings Staff