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) -- Commtouch Software (Nasdaq: CTCH) has been upgraded by TheStreet Ratings from hold to buy. 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. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- CTCH 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 4.17, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for COMMTOUCH SOFTWARE LTD is currently very high, coming in at 82.10%. Regardless of CTCH'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 14.20% trails the industry average.
- COMMTOUCH SOFTWARE LTD's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. Stable Earnings per share over the past year indicate the company has sound management over its earnings and share float. During the past fiscal year, COMMTOUCH SOFTWARE LTD increased its bottom line by earning $0.19 versus $0.18 in the prior year.
- The revenue fell significantly faster than the industry average of 36.4%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff