NEW YORK ( TheStreet) -- Digimarc Corporation (Nasdaq: DMRC) 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 find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- DMRC's very impressive revenue growth greatly exceeded the industry average of 0.7%. Since the same quarter one year prior, revenues leaped by 63.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- DMRC 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 8.42, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DIGIMARC CORP is currently very high, coming in at 81.90%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, DMRC's net profit margin of 7.50% significantly trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market on the basis of return on equity, DIGIMARC CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- DMRC has underperformed the S&P 500 Index, declining 9.66% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.