NEW YORK ( TheStreet) -- PT Indosat Tbk (NYSE: IIT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, solid stock price performance and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and weak operating cash flow. Highlights from the ratings report include:
- IIT, with its decline in revenue, underperformed when compared the industry average of 11.8%. Since the same quarter one year prior, revenues slightly dropped by 3.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for INDOSAT TBK is rather high; currently it is at 52.30%. Regardless of IIT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IIT's net profit margin of -3.30% significantly underperformed when compared to the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Wireless Telecommunication Services industry and the overall market on the basis of return on equity, INDOSAT TBK underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The debt-to-equity ratio of 1.27 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.38, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has decreased to $116.83 million or 33.51% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff