NEW YORK ( TheStreet) -- Net Communications Services (Nasdaq: NETC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.1%. Since the same quarter one year prior, revenues slightly increased by 5.2%. 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.
- The gross profit margin for NET SERVICOS COMUNICACAO SA is rather high; currently it is at 53.00%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.20% trails the industry average.
- Net operating cash flow has increased to $191.60 million or 12.53% when compared to the same quarter last year. Despite an increase in cash flow, NET SERVICOS COMUNICACAO SA's average is still marginally south of the industry average growth rate of 16.66%.
- The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that NETC's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
- Compared to its closing price of one year ago, NETC's share price has jumped by 41.22%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff