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) -- Quality Systems (Nasdaq: QSII) 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, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.
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- QSII's revenue growth trails the industry average of 15.4%. Since the same quarter one year prior, revenues slightly increased by 1.5%. 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.
- QSII 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 2.50, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for QUALITY SYSTEMS INC is rather high; currently it is at 63.50%. Regardless of QSII's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.64% trails the industry average.
- Net operating cash flow has decreased to $16.19 million or 34.27% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- 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 Health Care Technology industry average. The net income has significantly decreased by 26.0% when compared to the same quarter one year ago, falling from $21.11 million to $15.63 million.
-- Written by a member of TheStreet Ratings Staff