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) -- PMC-Sierra (Nasdaq: PMCS) has been upgraded by TheStreet Ratings from sell 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 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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- PMCS 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. To add to this, PMCS has a quick ratio of 1.52, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for PMC-SIERRA INC is currently very high, coming in at 75.60%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PMCS's net profit margin of 8.56% significantly trails the industry average.
- PMCS, with its decline in revenue, slightly underperformed the industry average of 10.9%. Since the same quarter one year prior, revenues fell by 15.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market, PMC-SIERRA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 60.9% when compared to the same quarter one year ago, falling from $28.37 million to $11.09 million.
-- Written by a member of TheStreet Ratings Staff