NEW YORK ( TheStreet) -- WNS holdings (NYSE: WNS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and poor profit margins. Highlights from the ratings report include:
- WNS (HOLDINGS) LTD -ADR's earnings per share declined by 18.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WNS (HOLDINGS) LTD -ADR increased its bottom line by earning $0.27 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.27).
- The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.
- WNS, with its decline in revenue, underperformed when compared the industry average of 1.1%. Since the same quarter one year prior, revenues fell by 28.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for WNS (HOLDINGS) LTD -ADR is rather low; currently it is at 24.70%. Regardless of WNS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.90% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the IT Services industry average. The net income has decreased by 14.6% when compared to the same quarter one year ago, dropping from $5.15 million to $4.40 million.
-- Written by a member of TheStreet Ratings Staff