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) -- Salesforce.com (NYSE: CRM) has been reiterated by TheStreet Ratings as a hold with a ratings score of C . The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, 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 34.9%. 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, CRM's share price has jumped by 27.64%, exceeding the performance of the broader market during that same time frame. Although CRM had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The gross profit margin for SALESFORCE.COM INC is currently very high, coming in at 83.40%. Regardless of CRM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CRM's net profit margin of -27.94% significantly underperformed when compared to the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, SALESFORCE.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $105.92 million or 17.70% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
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