NEW YORK ( TheStreet) -- Sourcefire (Nasdaq: FIRE) 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 increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and premium valuation.
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- The revenue growth greatly exceeded the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 38.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FIRE 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.
- Powered by its strong earnings growth of 500.00% and other important driving factors, this stock has surged by 107.68% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- 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. Compared to other companies in the Software industry and the overall market, SOURCEFIRE 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