NEW YORK ( TheStreet) -- Turkcell Iletisim Hizmetleri AS (NYSE: TKC) 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 and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, TKC has a quick ratio of 2.07, which demonstrates the ability of the company to cover short-term liquidity needs.
- 49.40% is the gross profit margin for TURKCELL ILETISIM HIZMET which we consider to be strong. Regardless of TKC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.00% trails the industry average.
- TURKCELL ILETISIM HIZMET reported flat earnings per share in the most recent quarter. 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, TURKCELL ILETISIM HIZMET reported lower earnings of $0.85 versus $1.32 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.85).
- Net operating cash flow has decreased to $282.30 million or 46.34% 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.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Wireless Telecommunication Services industry and the overall market, TURKCELL ILETISIM HIZMET's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff