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NEW YORK (

TheStreet

)

-- Procera Networks

(Nasdaq:

PKT

) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

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Highlights from the ratings report include:

  • 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, PROCERA NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • PKT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 39.71%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • PROCERA NETWORKS INC has improved earnings per share by 14.7% in the most recent quarter compared to 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, PROCERA NETWORKS INC swung to a loss, reporting -$0.81 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.81).
  • The gross profit margin for PROCERA NETWORKS INC is rather high; currently it is at 59.29%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -41.09% is in-line with the industry average.
  • PKT 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 5.96, which clearly demonstrates the ability to cover short-term cash needs.

Procera Networks, Inc. provides intelligent policy enforcement solutions based on deep packet inspection technology that enable mobile and broadband network operators and entities to manage and control their private networks. Procera has a market cap of $175.4 million and is part of the technology sector and computer software & services industry. Shares are down 43.5% year to date as of the close of trading on Wednesday.

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