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) -- Cbeyond (Nasdaq: CBEY) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
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- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Diversified Telecommunication Services industry average. The net income has decreased by 14.9% when compared to the same quarter one year ago, dropping from -$5.03 million to -$5.78 million.
- In its most recent trading session, CBEY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- CBEYOND INC's earnings per share declined by 11.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CBEYOND INC continued to lose money by earning -$0.08 versus -$0.27 in the prior year. For the next year, the market is expecting a contraction of 56.3% in earnings (-$0.13 versus -$0.08).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, CBEYOND INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- CBEY, with its decline in revenue, slightly underperformed the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff