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) -- Cogent Communications Group (Nasdaq: CCOI) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 3.0%. 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.
- Compared to its closing price of one year ago, CCOI's share price has jumped by 30.65%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- The gross profit margin for COGENT COMMUNICATIONS GRP is rather high; currently it is at 54.10%. Regardless of CCOI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.10% trails the industry average.
- COGENT COMMUNICATIONS GRP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, COGENT COMMUNICATIONS GRP increased its bottom line by earning $0.17 versus $0.02 in the prior year. For the next year, the market is expecting a contraction of 117.6% in earnings (-$0.03 versus $0.17).
- The debt-to-equity ratio is very high at 2.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 6.18, which shows the ability to cover short-term cash needs.
-- Written by a member of TheStreet Ratings Staff