NEW YORK ( TheStreet) -- General Communication (Nasdaq: GNCMA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally poor debt management. Highlights from the ratings report include:
- 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 201.4% when compared to the same quarter one year ago, falling from $1.93 million to -$1.96 million.
- The debt-to-equity ratio is very high at 5.07 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, GNCMA has managed to keep a strong quick ratio of 1.62, which demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, GNCMA's share price has jumped by 26.49%, exceeding the performance of the broader market during that same time frame. 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.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.3%. Since the same quarter one year prior, revenues slightly increased by 3.5%. 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.