NEW YORK ( TheStreet) -- DSP Group (Nasdaq: DSPG) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations 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 poor profit margins. Highlights from the ratings report include:
- The gross profit margin for DSP GROUP INC is currently lower than what is desirable, coming in at 30.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.40% is significantly below that of the industry average.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, DSP GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Net operating cash flow has significantly increased by 89.13% to -$0.35 million when compared to the same quarter last year. In addition, DSP GROUP INC has also vastly surpassed the industry average cash flow growth rate of -13.53%.
- DSPG 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. To add to this, DSPG has a quick ratio of 2.21, which demonstrates the ability of the company to cover short-term liquidity needs.