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) -- Nuance Communications (Nasdaq: NUAN) 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, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and unimpressive growth in net income.
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- The revenue growth came in higher than the industry average of 1.8%. Since the same quarter one year prior, revenues rose by 28.2%. 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.
- Net operating cash flow has increased to $122.95 million or 37.32% when compared to the same quarter last year. In addition, NUANCE COMMUNICATIONS INC has also vastly surpassed the industry average cash flow growth rate of -24.32%.
- NUAN's debt-to-equity ratio of 0.84 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that NUAN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.28 is high and demonstrates strong liquidity.
- 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 Software industry. The net income has significantly decreased by 336.6% when compared to the same quarter one year ago, falling from $9.34 million to -$22.10 million.
- The share price of NUANCE COMMUNICATIONS INC has not done very well: it is down 15.61% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
-- Written by a member of TheStreet Ratings Staff