NEW YORK ( TheStreet) -- Rovi (Nasdaq: ROVI) 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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 44.1%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.58, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.56 is very high and demonstrates very strong liquidity.
  • 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 Software industry. The net income has significantly decreased by 126.2% when compared to the same quarter one year ago, falling from $40.91 million to -$10.73 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Software industry and the overall market, ROVI CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

Rovi Corporation provides digital entertainment technology solutions for the discovery and management of entertainment content. The company has a P/E ratio of 43.3, below the average computer software & services industry P/E ratio of 44.2 and above the S&P 500 P/E ratio of 17.7. Rovi has a market cap of $4.8 billion and is part of the technology sector and computer software & services industry. Shares are down 25.8% year to date as of the close of trading on Friday.

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

null