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) -- Allot Communications (Nasdaq: ALLT) 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, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow.
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- The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 38.2%. 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.
- ALLT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.27, which clearly demonstrates the ability to cover short-term cash needs.
- ALLOT COMMUNICATIONS LTD's earnings per share declined by 12.5% 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, ALLOT COMMUNICATIONS LTD turned its bottom line around by earning $0.32 versus -$0.27 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus $0.32).
- 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. When compared to other companies in the Software industry and the overall market, ALLOT COMMUNICATIONS LTD's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $0.15 million or 95.56% 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