NEW YORK ( TheStreet) -- Ericsson Telephone Company (Nasdaq: ERIC) 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, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
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- Although ERIC's debt-to-equity ratio of 0.21 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.44, which illustrates the ability to avoid short-term cash problems.
- ERICSSON has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ERICSSON increased its bottom line by earning $0.56 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($0.57 versus $0.56).
- Net operating cash flow has significantly decreased to -$202.01 million or 122.04% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Communications Equipment industry and the overall market, ERICSSON's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff