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) -- Cogent Communications Group (Nasdaq: CCOI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk.
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- CCOI's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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, CCOI's share price has jumped by 40.46%, exceeding the performance of the broader market during that same time frame. Although CCOI 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 COGENT COMMUNICATIONS GRP is rather high; currently it is at 54.40%. Regardless of CCOI's high profit margin, it has managed to decrease from the same period last year.
- 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. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, COGENT COMMUNICATIONS GRP'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 Diversified Telecommunication Services industry. The net income has significantly decreased by 105.1% when compared to the same quarter one year ago, falling from $5.42 million to -$0.28 million.
-- Written by a member of TheStreet Ratings Staff