NEW YORK ( TheStreet) -- Synchronoss Technologies (Nasdaq: SNCR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 22.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SNCR's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.74, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for SYNCHRONOSS TECHNOLOGIES is rather high; currently it is at 55.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, SNCR's net profit margin of 8.50% significantly trails the industry average.
- Net operating cash flow has declined marginally to $6.63 million or 0.88% 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.
- SNCR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.98%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SNCR is still more expensive than most of the other companies in its industry.
-- Written by a member of TheStreet Ratings Staff