NEW YORK ( TheStreet) -- CSG Systems International (Nasdaq: CSGS) 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, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 38.0%. 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.
  • The gross profit margin for CSG SYSTEMS INTL INC is rather high; currently it is at 56.00%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.00% trails the industry average.
  • Even though the current debt-to-equity ratio is 1.17, it is still below the industry average, suggesting that this level of debt is acceptable within the IT Services industry. Despite the fact that CSGS's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.86 is high and demonstrates strong liquidity.
  • Net operating cash flow has significantly decreased to $0.71 million or 97.07% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Looking at the price performance of CSGS's shares over the past 12 months, there is not much good news to report: the stock is down 26.10%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, CSGS is still more expensive than most of the other companies in its industry.

CSG Systems International, Inc. provides outsourced customer care and billing solutions primarily to the cable and direct broadcast satellite industry in North America. It offers Advanced Convergent Platform, a customer care and billing solution, and related services and software products. The company has a P/E ratio of 15.1, equal to the average computer software & services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. CSG Systems International has a market cap of $481.6 million and is part of the technology sector and computer software & services industry. Shares are down 29.7% year to date as of the close of trading on Friday.

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