NEW YORK ( TheStreet) -- Majesco Entertainment Company (Nasdaq: COOL) 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, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- COOL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, COOL has a quick ratio of 2.13, which demonstrates the ability of the company to cover short-term liquidity needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, MAJESCO ENTERTAINMENT CO's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $10.09 million or 9.34% when compared to the same quarter last year. Despite an increase in cash flow, MAJESCO ENTERTAINMENT CO's average is still marginally south of the industry average growth rate of 19.33%.
- 40.00% is the gross profit margin for MAJESCO ENTERTAINMENT CO which we consider to be strong. Regardless of COOL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, COOL's net profit margin of 8.90% is significantly lower than the same period one year prior.
- COOL'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 52.50%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
-- Written by a member of TheStreet Ratings Staff