NEW YORK ( TheStreet) -- Microsemi (Nasdaq: MSCC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 116.3% when compared to the same quarter one year ago, falling from $7.96 million to -$1.30 million.
  • Net operating cash flow has significantly decreased to $9.62 million or 52.06% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite currently having a low debt-to-equity ratio of 0.47, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that MSCC's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.31 is high and demonstrates strong liquidity.
  • The gross profit margin for MICROSEMI CORP is rather high; currently it is at 55.80%. 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 -0.70% is in-line with the industry average.
  • MSCC's very impressive revenue growth greatly exceeded the industry average of 7.1%. Since the same quarter one year prior, revenues leaped by 63.4%. 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.

Microsemi Corporation engages in the design, manufacture, and marketing of analog and mixed-signal integrated circuits (IC) and semiconductors primarily in the United States, as well as in Europe and Asia. The company has a P/E ratio of 34.4, equal to the average electronics industry P/E ratio and above the S&P 500 P/E ratio of 16. Microsemi has a market cap of $1.8 billion and is part of the technology sector and electronics industry. Shares are down 10.8% year to date as of the close of trading on Tuesday.

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