NEW YORK ( TheStreet) -- Retalix (Nasdaq: RTLX) 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, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- RTLX's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues rose by 11.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RTLX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.86, which clearly demonstrates the ability to cover short-term cash needs.
- 44.50% is the gross profit margin for RETALIX LTD which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RTLX's net profit margin of 4.90% significantly trails the industry average.
- After a year of stock price fluctuations, the net result is that RTLX's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Software industry and the overall market, RETALIX LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.