NEW YORK ( TheStreet) -- Brocade Communications Systems (Nasdaq: BRCD) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 117.6% when compared to the same quarter one year prior, rising from $26.92 million to $58.58 million.
- BRCD's revenue growth trails the industry average of 20.4%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $127.05 million or 7.45% when compared to the same quarter last year. Despite an increase in cash flow, BROCADE COMMUNICATIONS SYS's average is still marginally south of the industry average growth rate of 9.22%.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market, BROCADE COMMUNICATIONS SYS's return on equity significantly trails that of both the industry average and the S&P 500.
- BRCD has underperformed the S&P 500 Index, declining 19.93% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
-- Written by a member of TheStreet Ratings Staff