NEW YORK ( TheStreet) -- Telefonos de Mexico S.A.B. de C.V (Nasdaq: TFONY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, increase in stock price during the past year and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, weak operating cash flow and deteriorating net income. Highlights from the ratings report include:
- The gross profit margin for TELMEX-TELEFONOS DE MEXICO is rather high; currently it is at 61.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.20% is above that of the industry average.
- After a year of stock price fluctuations, the net result is that TFONY's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The revenue fell significantly faster than the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 43.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio of 1.26 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, TFONY has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly decreased to $238.53 million or 69.64% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.