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) -- Epiq Systems (Nasdaq: EPIQ) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.
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- The revenue growth came in higher than the industry average of 2.0%. Since the same quarter one year prior, revenues rose by 19.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- EPIQ SYSTEMS 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, EPIQ SYSTEMS INC reported lower earnings of $0.33 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.33).
- EPIQ's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.94%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Net operating cash flow has significantly decreased to $4.00 million or 77.40% 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