NEW YORK ( TheStreet) -- Vasco Data Security International (Nasdaq: VDSI) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- VDSI's very impressive revenue growth greatly exceeded the industry average of 2.1%. Since the same quarter one year prior, revenues leaped by 73.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- VDSI 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 3.28, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for VASCO DATA SEC INTL INC is rather high; currently it is at 63.20%. Regardless of VDSI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VDSI's net profit margin of 6.10% is significantly lower than the same period one year prior.
- VDSI has underperformed the S&P 500 Index, declining 6.03% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has significantly decreased to $0.24 million or 93.63% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.