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) -- QAD (Nasdaq: QADA) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, relatively poor performance when compared with the S&P 500 during the past year 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 significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 45.4% when compared to the same quarter one year ago, falling from $3.68 million to $2.01 million.
- 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. When compared to other companies in the Software industry and the overall market, QAD INC's return on equity is below that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $5.61 million or 33.28% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, QAD INC has marginally lower results.
- In its most recent trading session, QADA 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- QAD INC's earnings per share declined by 45.5% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, QAD INC reported lower earnings of $0.40 versus $0.65 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.40).
-- Written by a member of TheStreet Ratings Staff