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 reiterated by TheStreet Ratings as a buy with a ratings score of B . 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, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 21.9%. 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.
- VMW's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, VMW has a quick ratio of 2.45, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for VMWARE INC is currently very high, coming in at 88.80%. Regardless of VMW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VMW's net profit margin of 17.10% significantly outperformed against the industry.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market on the basis of return on equity, VMWARE INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- VMWARE INC's earnings per share declined by 13.7% 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, VMWARE INC increased its bottom line by earning $1.67 versus $0.85 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $1.67).
VMware, Inc. provides virtualization and virtualization-based cloud infrastructure solutions in the United States and internationally. The company has a P/E ratio of 54, above the average computer software & services industry P/E ratio of 53.2 and above the S&P 500 P/E ratio of 17.7. VMWare has a market cap of $11.83 billion and is part of the
industry. Shares are up 9.7% year to date as of the close of trading on Thursday.
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--Written by a member of TheStreet Ratings Staff.