NEW YORK ( TheStreet) -- Zix Corporation (Nasdaq: ZIXI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.

Highlights from the ratings report include:
  • ZIX CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ZIX CORP turned its bottom line around by earning $0.60 versus -$0.06 in the prior year. For the next year, the market is expecting a contraction of 74.2% in earnings ($0.16 versus $0.60).
  • The gross profit margin for ZIX CORP is currently very high, coming in at 80.40%. Regardless of ZIXI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 25.90% trails the industry average.
  • Compared to other companies in the Internet Software & Services industry and the overall market, ZIX CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.

Zix Corporation provides Internet-based applications in a Software-as-a-Service model to connect, protect, and deliver information, enabling the use of the Internet for applications requiring security in the healthcare, finance, insurance, and government sectors primarily in the United States. The company has a P/E ratio of 6.1, above the average internet industry P/E ratio of six and below the S&P 500 P/E ratio of 16.7. Zix has a market cap of $253.1 million and is part of the technology sector and internet industry. Shares are down 12.9% year to date as of the close of trading on Tuesday.

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