Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model NEW YORK ( TheStreet) -- HiSoft Technology International (Nasdaq: HSFT) has been downgraded by TheStreet Ratings from hold to sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.
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- 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 the other companies in the IT Services industry and the overall market, HISOFT TECHNOLOGY INTL -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
- 39.30% is the gross profit margin for HISOFT TECHNOLOGY INTL -ADR which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.90% trails the industry average.
- HSFT 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 3.82, which clearly demonstrates the ability to cover short-term cash needs.
-- Written by a member of TheStreet Ratings Staff