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) -- Youku Tudou (NYSE: YOKU) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
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- YOKU's very impressive revenue growth greatly exceeded the industry average of 33.5%. Since the same quarter one year prior, revenues leaped by 93.7%. 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.
- YOKU's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.07, which clearly demonstrates the ability to cover short-term cash needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.09%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.14% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, YOUKU TUDOU INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for YOUKU TUDOU INC is rather low; currently it is at 24.70%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -18.41% is significantly below that of the industry average.
-- Written by a member of TheStreet Ratings Staff