NEW YORK ( TheStreet) -- LogMeIn (Nasdaq: LOGM) has been downgraded by TheStreet Ratings from buy 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, robust revenue growth and expanding profit margins. 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:
  • Net operating cash flow has decreased to $5.43 million or 30.21% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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. In comparison to the other companies in the Internet Software & Services industry and the overall market, LOGMEIN INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for LOGMEIN INC is currently very high, coming in at 95.00%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, LOGM's net profit margin of 9.20% significantly trails the industry average.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 26.1%. Since the same quarter one year prior, revenues rose by 23.9%. 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.
  • Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.11 is very high and demonstrates very strong liquidity.

LogMeIn, Inc. provides on-demand, remote-connectivity solutions to small and medium-sized businesses, information technology (IT) service providers, and consumers in the United States and internationally. LogMeIn has a market cap of $860.2 million and is part of the technology sector and computer software & services industry. Shares are down 20.9% year to date as of the close of trading on Tuesday.

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