NEW YORK ( TheStreet) -- QAD (Nasdaq: QADA) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its 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 we feel that the company's cash flow from its operations has been weak overall. Highlights from the ratings report include:
- QADA's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although QADA's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
- 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. Compared to other companies in the Software industry and the overall market on the basis of return on equity, QAD INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- QAD INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, QAD INC increased its bottom line by earning $0.65 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 1.5% in earnings ($0.64 versus $0.65).
- Net operating cash flow has decreased to $8.41 million or 14.62% 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 RatingsStaff