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) -- Ciena Corporation (Nasdaq: CIEN) 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 poor profit margins.
- ACTIVE STOCK TRADERS: Get full access to Jim Cramer's thoughts for less than $3/week - sometimes before he says them on TV! Start with a 14-Day Free Trial.
- 42.40% is the gross profit margin for CIENA CORP which we consider to be strong. Regardless of CIEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CIEN's net profit margin of -6.30% significantly underperformed when compared to the industry average.
- The stock price has risen over the past year, but it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Communications Equipment industry average. The net income increased by 5.2% when compared to the same quarter one year prior, going from -$31.45 million to -$29.82 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CIENA CORP has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CIENA CORP continued to lose money by earning -$2.06 versus -$3.59 in the prior year. This year, the market expects an improvement in earnings (-$0.23 versus -$2.06).
-- Written by a member of TheStreet Ratings Staff