NEW YORK ( TheStreet) -- Shenandoah Telecommunications (Nasdaq: SHEN) 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, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and unimpressive growth in net income.

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 Wireless Telecommunication Services industry. The net income has significantly decreased by 56.6% when compared to the same quarter one year ago, falling from $6.26 million to $2.71 million.
  • SHENANDOAH TELECOMMUN CO's earnings per share declined by 41.7% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SHENANDOAH TELECOMMUN CO reported lower earnings of $0.79 versus $1.06 in the prior year. For the next year, the market is expecting a contraction of 17.7% in earnings ($0.65 versus $0.79).
  • The gross profit margin for SHENANDOAH TELECOMMUN CO is rather high; currently it is at 59.40%. Regardless of SHEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SHEN's net profit margin of 4.70% is significantly lower than the same period one year prior.
  • Net operating cash flow has increased to $21.51 million or 47.66% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 36.29%.
  • SHEN's revenue growth trails the industry average of 58.0%. Since the same quarter one year prior, revenues rose by 43.9%. 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.

Shenandoah Telecommunications Company, through its subsidiaries, provides regulated and unregulated telecommunications services to end-user customers and other communications providers in the southeastern United States. The company has a P/E ratio of 21.4, below the average telecommunications industry P/E ratio of 22.3 and above the S&P 500 P/E ratio of 16.9. Shenandoah Telecommunications has a market cap of $402.1 million and is part of the technology sector and telecommunications industry. Shares are down 12% year to date as of the previous trading day's close.

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