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) -- Rovi (Nasdaq: ROVI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income 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 weak operating cash flow.
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- ROVI CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ROVI CORP increased its bottom line by earning $0.13 versus $0.08 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $0.13).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 104.3% when compared to the same quarter one year prior, rising from -$49.35 million to $2.14 million.
- ROVI's debt-to-equity ratio of 0.93 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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.28 is very high and demonstrates very strong liquidity.
- Net operating cash flow has decreased to $71.18 million or 25.59% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ROVI CORP has marginally lower results.
- ROVI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 48.84%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
-- Written by a member of TheStreet Ratings Staff