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) -- Super Micro Computer (Nasdaq: SMCI) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
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- SMCI's revenue growth trails the industry average of 23.4%. Since the same quarter one year prior, revenues slightly increased by 6.0%. 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.
- SUPER MICRO COMPUTER INC's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SUPER MICRO COMPUTER INC reported lower earnings of $0.67 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.67).
- The gross profit margin for SUPER MICRO COMPUTER INC is rather low; currently it is at 16.10%. Regardless of SMCI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SMCI's net profit margin of 2.00% is significantly lower than the same period one year prior.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 48.6% when compared to the same quarter one year ago, falling from $10.73 million to $5.51 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Computers & Peripherals industry and the overall market, SUPER MICRO COMPUTER INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff