NEW YORK (TheStreet) -- Vonage (VG) - Get Report was gaining 9.1% to $4.19 Thursday after beating analysts' estimates for earning in the first quarter.

The communications company reported earnings of 6 cents a share for the first quarter, beating the Capital IQ Consensus Estimate of 3 cents a share by 3 cents. Revenue increased 5.5% year-over-year to $220.7 million. Analysts expected revenue of $220.25 million for the quarter.

Average revenue per user (ARPU) wad $28.86 for the first quarter, up $28.72 sequentially from the fourth quarter due to the new Vonage Business Solutions the company formed when it acquired Vocalocity in November 2013. ARPU was down from $29.61 in the year-ago quarter due to the growing proportion of BasicTalk lines.

"Vonage generated strong results for the quarter, including increased revenue both sequentially and year-over-year, as well as the highest level of adjusted EBITDA in the last four quarters," CEO Marc Lefar said in a press release. "Vonage Business Solutions' strong performance reflects an acceleration in growth, and we will continue to invest to further penetrate the attractive market for small and medium businesses."

Must read:Warren Buffett's 10 Favorite Growth Stocks

SELL NOW: If you own any of the 900 stocks that TheStreet Quant Ratings has identified as a 'Sell' could potentially lose EVERYTHING in the next 6-12 months. Learn more.

TheStreet Ratings team rates VONAGE HOLDINGS CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate VONAGE HOLDINGS CORP (VG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for VONAGE HOLDINGS CORP is currently very high, coming in at 70.61%. 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 1.69% trails the industry average.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that VG's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.7%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, VONAGE HOLDINGS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $36.09 million or 40.88% 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.
  • You can view the full analysis from the report here: VG Ratings Report

STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months.Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.