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) -- Netsol Technologies (Nasdaq: NTWK) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.
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- NTWK's very impressive revenue growth greatly exceeded the industry average of 6.1%. Since the same quarter one year prior, revenues leaped by 107.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NTWK's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NTWK has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
- NETSOL TECHNOLOGIES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NETSOL TECHNOLOGIES INC reported lower earnings of $0.40 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus $0.40).
- 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. Compared to other companies in the Software industry and the overall market, NETSOL TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $2.86 million or 56.63% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet Ratings Staff