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) -- United States Cellular Corporation (NYSE: USM) has been downgraded by TheStreet Ratings from buy 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 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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- Despite its growing revenue, the company underperformed as compared with the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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.
- USM's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, USM has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- US CELLULAR CORP's earnings per share declined by 42.5% 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, US CELLULAR CORP increased its bottom line by earning $2.06 versus $1.56 in the prior year. This year, the market expects an improvement in earnings ($2.08 versus $2.06).
- 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 Wireless Telecommunication Services industry. The net income has significantly decreased by 42.9% when compared to the same quarter one year ago, falling from $62.14 million to $35.45 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Wireless Telecommunication Services industry and the overall market, US CELLULAR CORP'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