NEW YORK ( TheStreet) -- Mitek Systems (Nasdaq: MITK) 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 compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- MITK's very impressive revenue growth greatly exceeded the industry average of 1.3%. Since the same quarter one year prior, revenues leaped by 150.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MITK 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 8.39, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for MITEK SYSTEMS INC is currently very high, coming in at 93.10%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MITK's net profit margin of 0.70% significantly trails the industry average.
- Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 85.33% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- 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, MITEK SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff