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) -- BroadSoft (Nasdaq: BSFT) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and premium valuation.
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- The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 25.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $11.69 million or 31.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.39%.
- Despite currently having a low debt-to-equity ratio of 0.59, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.59 is very high and demonstrates very strong liquidity.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Software industry and the overall market, BROADSOFT INC'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