NEW YORK ( TheStreet) -- Knot (Nasdaq: KNOT) has been downgraded by TheStreet Ratings from buy 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 expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive. 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 Internet Software & Services industry. The net income has significantly decreased by 535.1% when compared to the same quarter one year ago, falling from -$0.11 million to -$0.71 million.
- This stock has managed to rise its share value by 26.28% over the past twelve months. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- KNOT INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KNOT INC turned its bottom line around by earning $0.10 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus $0.10).
- KNOT 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 4.98, which clearly demonstrates the ability to cover short-term cash needs.
- KNOT's revenue growth trails the industry average of 21.0%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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.