NEW YORK ( TheStreet) -- LML Payment Systems (Nasdaq: LMLP) 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 find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:
  • LMLP's revenue growth has slightly outpaced the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 16.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LMLP's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, LMLP has a quick ratio of 2.05, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 IT Services industry and the overall market on the basis of return on equity, LML PAYMENT SYSTEMS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 45.00% is the gross profit margin for LML PAYMENT SYSTEMS INC which we consider to be strong. Regardless of LMLP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.60% trails the industry average.
  • Net operating cash flow has significantly decreased to -$4.39 million or 415.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

LML Payment Systems Inc. provides payment processing solutions primarily to businesses and organizations that use Internet to receive or send payments in Canada and the United States. The company has a P/E ratio of 7.1, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. LML Payment Systems has a market cap of $73.6 million and is part of the services sector and diversified services industry. Shares are down 27.5% year to date as of the close of trading on Friday.

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

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