NEW YORK ( TheStreet) -- Evolving Systems (Nasdaq: EVOL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and weak operating cash flow. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 1055.1% when compared to the same quarter one year prior, rising from $1.58 million to $18.20 million.
- EVOL'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. Along with this, the company maintains a quick ratio of 3.83, which clearly demonstrates the ability to cover short-term cash needs.
- EVOL, with its decline in revenue, underperformed when compared the industry average of 2.4%. Since the same quarter one year prior, revenues fell by 21.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Net operating cash flow has significantly decreased to -$1.69 million or 239.55% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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. Compared to other companies in the Software industry and the overall market, EVOLVING SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.