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) -- ViroPharma (Nasdaq: VPHM) 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, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- VPHM's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.27, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for VIROPHARMA INC is currently very high, coming in at 74.70%. Regardless of VPHM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VPHM's net profit margin of -5.00% significantly underperformed when compared to the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Pharmaceuticals industry and the overall market, VIROPHARMA INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to -$0.08 million or 100.14% 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