NEW YORK ( TheStreet) -- Maxygen (Nasdaq: MAXY) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has decreased to -$4.45 million or 15.35% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, MAXYGEN INC has marginally lower results.
  • MAXY'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 31.72%, 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.
  • 41.60% is the gross profit margin for MAXYGEN INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MAXY's net profit margin of 1191.10% significantly outperformed against the industry.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Biotechnology industry and the overall market, MAXYGEN INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MAXY 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 9.33, which clearly demonstrates the ability to cover short-term cash needs.

Maxygen, Inc., a biopharmaceutical company, focuses on developing improved versions of protein drugs. The company has a P/E ratio of 1.8, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 17.5. Maxygen has a market cap of $124.5 million and is part of the services sector and diversified services industry. Shares are up 4.1% year to date as of the close of trading on Thursday.

You can view the full Maxygen Ratings Report or get investment ideas from our investment research center.
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