2 Stocks With Downgrades: ARUN, WOOF

NEW YORK ( TheStreet) -- The following stocks were downgraded by TheStreet Ratings on Tuesday: Aruba Networks ( ARUN) and VCA Antech ( WOOF).

Aruba Networks

The telecommunications equipment company reported last week a second-quarter loss of $11.4 million, or 11 cents a share, wider than a year-earlier loss of $2.8 million, or 3 cents.

"ARUN's balance sheet remains solid: $276M in cash, no debt, net cash of $2.30/share, DSO of 49 days (down 2 days Q/Q), and inventory turnover of 5x (flat Q/Q)," FBN Securities analysts wrote in a Feb. 17 report. "Deferred revenue of $91M was flat Q/Q, resulting in bookings of $126M (down 12% Q/Q). However, deferred revenue spiked by 33% Q/Q the prior quarter due to inventory fill at new distributor Synnex, so flat growth off of this is fine."

Shares of Aruba Networks were downgraded to hold from buy at TheStreet Ratings.

"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," TheStreet Ratings wrote. "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 premium valuation."

Aruba Networks has a forward P/E of 27.38; the average for telecommunications equipment companies is 28.38. For comparison, Riverbed Technology ( RVBD) and Polycom ( PLCM) have lower forward P/Es of 21.79 and 14.01, respectively.

Eleven of the 21 analysts who cover Aruba Networks rated it buy. Nine analysts gave it a hold rating and one rated it sell.

TheStreet Ratings gives Aruba Networks a C+ grade. The stock closed Friday at $22.18 and has risen 18.74% year to date.

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VCA Antech

The animal health care company reported last week a fourth-quarter loss of $3.2 million, or 2 cents a share, a reversal from year-earlier earnings of $21.5 million, or 25 cents.

"While guidance might be conservative, we are somewhat encouraged as this is a sign of confidence in current market conditions illustrated by continued same-store growth improvement," Piper Jaffray analysts wrote in a Feb. 17 report. "We remain on the sidelines at Neutral and look to get more constructive on the stock as we see evidence of leverage in the model."

Shares of VCA Antech were downgraded to hold from buy at TheStreet Ratings.

"The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures," TheStreet Ratings wrote. "However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

VCA Antech has a forward P/E of 13.64; the average for specialized consumer services is 19.12. For comparison, DeVry ( DV) has a lower forward P/E of 10.69; Sothebys' ( BID) forward P/E is 14.13.

Eight of the 13 analysts who cover VCA Antech rated it buy. Four analysts gave it a hold rating and one considered it a sell.

TheStreet Ratings gives VCA Antech a C+ grade. The stock closed Friday at $22.38 and has increased 13.37% year to date.

-- Written by Alexandra Zendrian

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