NEW YORK ( TheStreet) -- Infosys (Nasdaq: INFY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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- The revenue growth came in higher than the industry average of 10.2%. Since the same quarter one year prior, revenues slightly increased by 4.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- INFY 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. Along with this, the company maintains a quick ratio of 5.16, which clearly demonstrates the ability to cover short-term cash 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. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, INFOSYS LTD has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- 39.60% is the gross profit margin for INFOSYS LTD which we consider to be strong. Regardless of INFY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, INFY's net profit margin of 23.70% compares favorably to the industry average.
- INFY'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 39.02%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
-- Written by a member of TheStreet Ratings Staff