NEW YORK ( TheStreet) -- Ceragon Networks (Nasdaq: CRNT) 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, 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 weak operating cash flow.

Highlights from the ratings report include:
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, CERAGON NETWORKS LTD'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 Communications Equipment industry. The net income has significantly decreased by 807.1% when compared to the same quarter one year ago, falling from $3.02 million to -$21.38 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • CRNT's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
  • CRNT's very impressive revenue growth greatly exceeded the industry average of 9.2%. Since the same quarter one year prior, revenues leaped by 68.1%. 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.

Ceragon Networks Ltd. offers wireless backhaul solutions that enable cellular operators and other wireless service providers to deliver voice and data services, such as Internet browsing, music, and video applications. The company has a P/E ratio of 30.6, equal to the average telecommunications industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Ceragon has a market cap of $410.2 million and is part of the technology sector and telecommunications industry. Shares are down 11.8% year to date as of the close of trading on Tuesday.

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