NEW YORK ( TheStreet) -- Brasil Telecom SA ADS Pfd Shs Sponsored Ame (NYSE: BTM) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, 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 deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, BRASIL TELECOM SA's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 512.4% when compared to the same quarter one year ago, falling from $84.88 million to -$350.02 million.
- The gross profit margin for BRASIL TELECOM SA is currently very high, coming in at 84.50%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -21.80% is in-line with 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems.
- The revenue growth came in higher than the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 19.4%. 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.