NEW YORK ( TheStreet) -- Internet Initiative Japan (Nasdaq: IIJI) 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, solid stock price performance 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:
  • IIJI's very impressive revenue growth greatly exceeded the industry average of 31.9%. Since the same quarter one year prior, revenues leaped by 62.1%. 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 166.66% and other important driving factors, this stock has surged by 70.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • IIJI's debt-to-equity ratio of 0.66 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.81 is weak.
  • The gross profit margin for INTERNET INITIATIVE JAPAN INC is currently lower than what is desirable, coming in at 26.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.20% significantly trails the industry average.
  • Net operating cash flow has decreased to $16.40 million or 36.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Internet Initiative Japan Inc., together with its subsidiaries, provides Internet connectivity, WAN, outsourcing, and systems integration services to customers primarily in Japan. The company has a P/E ratio of 19, above the average internet industry P/E ratio of 17.6 and above the S&P 500 P/E ratio of 17.7. Internet Initiative Japan has a market cap of $747.5 million and is part of the technology sector and internet industry. Shares are up 29.2% year to date as of the close of trading on Monday.

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