Rating Change #3

RightNow Technologies ( RNOW) 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, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally poor debt management.

Highlights from the ratings report include:
  • Net operating cash flow has declined marginally to $3.50 million or 0.37% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Currently the debt-to-equity ratio of 1.92 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, RNOW has managed to keep a strong quick ratio of 2.39, which demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 112.34% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, RIGHTNOW TECHNOLOGIES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • RNOW's revenue growth has slightly outpaced the industry average of 20.2%. Since the same quarter one year prior, revenues rose by 24.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Rightnow Technologies, Inc. provides cloud-based customer experience software products and services. The company primarily offers RightNow CX, a customer experience suite for consumer-centric organizations to enable interactions across Web, social, and contact center touch points. The company has a P/E ratio of 37.3, equal to the average computer software & services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. RightNow has a market cap of $1 billion and is part of the technology sector and computer software & services industry. Shares are up 32.2% year to date as of the close of trading on Wednesday.

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

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