NEW YORK ( TheStreet) -- Demand Media (NYSE: DMD) 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, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 23.5%. Since the same quarter one year prior, revenues rose by 14.7%. 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.
- Net operating cash flow has increased to $27.22 million or 30.05% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.58%.
- DMD 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
- DEMAND MEDIA INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DEMAND MEDIA INC swung to a loss, reporting -$0.23 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus -$0.23).
- 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 Internet Software & Services industry. The net income has significantly decreased by 724.5% when compared to the same quarter one year ago, falling from $1.03 million to -$6.43 million.
-- Written by a member of TheStreet RatingsStaff