NEW YORK ( TheStreet) -- NetScout Systems (Nasdaq: NTCT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. 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:
  • NTCT's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NTCT has a quick ratio of 1.89, which demonstrates the ability of the company to cover short-term liquidity needs.
  • NETSCOUT SYSTEMS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NETSCOUT SYSTEMS INC increased its bottom line by earning $0.87 versus $0.67 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.87).
  • Net operating cash flow has significantly decreased to $6.32 million or 73.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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, NETSCOUT SYSTEMS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

NetScout Systems, Inc. engages in the design, development, manufacture, marketing, sale, and support of unified service delivery management, service assurance, and application and network performance management solutions worldwide. The company has a P/E ratio of 16.2, equal to the average computer software & services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. NetScout Systems has a market cap of $525 million and is part of the technology sector and computer software & services industry. Shares are down 47.3% year to date as of the close of trading on Tuesday.

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