NEW YORK ( TheStreet) -- Net Communications Services (Nasdaq: NETC) 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, expanding profit margins and solid stock price performance. 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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- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that NETC's debt-to-equity ratio is low, the quick ratio, which is currently 0.50, displays a potential problem in covering short-term cash needs.
- The gross profit margin for NET SERVICOS COMUNICACAO SA is rather high; currently it is at 52.10%. Regardless of NETC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.00% trails the industry average.
- NETC, with its decline in revenue, underperformed when compared the industry average of 7.4%. Since the same quarter one year prior, revenues fell by 20.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Media industry and the overall market, NET SERVICOS COMUNICACAO SA's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $212.09 million or 30.12% 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.
-- Written by a member of TheStreet Ratings Staff