NEW YORK ( TheStreet) -- LogMeIn (Nasdaq: LOGM) 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, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 216.9% when compared to the same quarter one year prior, rising from -$0.07 million to $0.08 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 23.3%. Since the same quarter one year prior, revenues rose by 20.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- LOGMEIN INC has shown no change in earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LOGMEIN INC reported lower earnings of $0.23 versus $0.85 in the prior year. This year, the market expects an improvement in earnings ($0.65 versus $0.23).
- Net operating cash flow has declined marginally to $7.86 million or 6.32% 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.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, LOGMEIN INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff