Rating Change #6

Acme Packet Inc ( APKT) 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 good cash flow from operations. 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 disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 6.1%. Since the same quarter one year prior, revenues rose by 24.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • APKT 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 8.17, which clearly demonstrates the ability to cover short-term cash needs.
  • ACME PACKET INC's earnings per share declined by 26.7% 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, ACME PACKET INC increased its bottom line by earning $0.63 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($1.14 versus $0.63).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Communications Equipment industry and the overall market, ACME PACKET INC's return on equity is below that of both the industry average and the S&P 500.

Acme Packet, Inc. provides session delivery network solutions that enable the delivery of interactive communications, such as voice, video, and multimedia sessions; and data services across internet protocol (IP) network borders. The company has a P/E ratio of 43.9, equal to the average telecommunications industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Acme Packet has a market cap of $2.06 billion and is part of the technology sector and telecommunications industry. Shares are down 42.2% year to date as of the close of trading on Friday.

You can view the full Acme Packet Ratings Report or get investment ideas from our investment research center.

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