NEW YORK ( TheStreet) -- China TechFaith Wireless Comm Tech (Nasdaq: CNTF) 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 impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and poor profit margins. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 26.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CNTF's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.87, which clearly demonstrates the ability to cover short-term cash needs.
- CNTF's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 45.51%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The change in net income from the same quarter one year ago has exceeded that of the Communications Equipment industry average, but is less than that of the S&P 500. The net income has decreased by 1.9% when compared to the same quarter one year ago, dropping from $7.48 million to $7.34 million.