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) -- VeriFone Systems (NYSE: PAY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
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- The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 17.5%. 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.
- Net operating cash flow has increased to $72.60 million or 37.19% when compared to the same quarter last year. In addition, VERIFONE SYSTEMS INC has also vastly surpassed the industry average cash flow growth rate of -30.53%.
- 47.00% is the gross profit margin for VERIFONE SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PAY's net profit margin of 5.52% significantly trails the industry average.
- 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. In comparison to the other companies in the IT Services industry and the overall market, VERIFONE SYSTEMS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.70%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 86.95% compared to the year-earlier 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