NEW YORK ( TheStreet) -- Edgewater Technology (Nasdaq: EDGW) 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 solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- EDGW's revenue growth has slightly outpaced the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 17.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- EDGW'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. To add to this, EDGW has a quick ratio of 1.80, which demonstrates the ability of the company to cover short-term liquidity needs.
- 37.40% is the gross profit margin for EDGEWATER TECHNOLOGY INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.20% trails the industry average.
- EDGEWATER TECHNOLOGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EDGEWATER TECHNOLOGY INC reported poor results of -$1.93 versus -$0.32 in the prior year. This year, the market expects an improvement in earnings ($0.09 versus -$1.93).
- 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. In comparison to the other companies in the IT Services industry and the overall market, EDGEWATER TECHNOLOGY INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.