NEW YORK ( TheStreet) -- Saba Software (Nasdaq: SABA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and disappointing return on equity. 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 Internet Software & Services industry and the overall market, SABA SOFTWARE INC'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 Internet Software & Services industry. The net income has significantly decreased by 102.1% when compared to the same quarter one year ago, falling from $0.43 million to -$0.01 million.
- SABA SOFTWARE INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. 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, SABA SOFTWARE INC turned its bottom line around by earning $0.09 versus -$0.08 in the prior year. This year, the market expects an improvement in earnings ($0.11 versus $0.09).
- Despite its growing revenue, the company underperformed as compared with the industry average of 20.6%. Since the same quarter one year prior, revenues rose by 13.8%. 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.
- Compared to its closing price of one year ago, SABA's share price has jumped by 79.01%, exceeding the performance of the broader market during that same time frame. Although SABA had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.