NEW YORK ( TheStreet) -- Telephone and Data Systems (NYSE: TDS) has been downgraded by TheStreet Ratings from buy 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.0%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.39, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that TDS's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.64 is high and demonstrates strong liquidity.
- The gross profit margin for TELEPHONE & DATA SYSTEMS INC is rather high; currently it is at 57.60%. Regardless of TDS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TDS's net profit margin of -0.50% significantly underperformed when compared to the industry average.
- Net operating cash flow has decreased to $282.45 million or 20.92% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, TELEPHONE & DATA SYSTEMS INC has marginally lower results.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Wireless Telecommunication Services industry. The net income has significantly decreased by 147.1% when compared to the same quarter one year ago, falling from $13.14 million to -$6.19 million.
-- Written by a member of TheStreet Ratings Staff