NEW YORK ( TheStreet) -- Insweb Corporation (Nasdaq: INSW) 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, robust revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • Despite the fact that INSW's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.93 is high and demonstrates strong liquidity.
  • The revenue growth came in higher than the industry average of 25.8%. Since the same quarter one year prior, revenues rose by 35.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 180.00% and other important driving factors, this stock has surged by 26.73% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The gross profit margin for INSWEB CORP is currently extremely low, coming in at 1.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.90% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to -$1.18 million or 229.08% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

InsWeb Corporation operates an online insurance marketplace that electronically matches consumers and providers of automobile, property, health, term life, and small business insurance in the United States and District of Columbia. The company has a P/E ratio of 22.2, equal to the average diversified services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Insweb has a market cap of $35.6 million and is part of the services sector and diversified services industry. Shares are down 24.1% year to date as of the close of trading on Thursday.

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