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) -- NetApp (Nasdaq: NTAP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, 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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- Although NTAP's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. To add to this, NTAP has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for NETAPP INC is rather high; currently it is at 64.60%. Regardless of NTAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NTAP's net profit margin of 4.40% 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 54.3% when compared to the same quarter one year ago, falling from $139.50 million to $63.80 million.
- The share price of NETAPP INC has not done very well: it is down 24.51% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
-- Written by a member of TheStreet Ratings Staff