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) -- QLogic Corporation (Nasdaq: QLGC) has been upgraded by TheStreet Ratings from hold to buy. 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. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- QLGC 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 7.46, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for QLOGIC CORP is currently very high, coming in at 73.60%. Regardless of QLGC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, QLGC's net profit margin of 11.09% is significantly lower than the industry average.
- The revenue fell significantly faster than the industry average of 18.0%. Since the same quarter one year prior, revenues fell by 16.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has decreased to $32.72 million or 37.40% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- 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 Computers & Peripherals industry and the overall market, QLOGIC CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff