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) -- Telephone and Data Systems (NYSE: TDS) 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- TDS's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 2.2%. 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.
- The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, TDS has a quick ratio of 1.56, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for TELEPHONE & DATA SYSTEMS INC is rather high; currently it is at 52.80%. Regardless of TDS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TDS's net profit margin of -3.10% significantly underperformed when compared to the industry average.
- TELEPHONE & DATA SYSTEMS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, TELEPHONE & DATA SYSTEMS INC reported lower earnings of $0.75 versus $1.68 in the prior year. For the next year, the market is expecting a contraction of 62.7% in earnings ($0.28 versus $0.75).
- 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 Wireless Telecommunication Services industry. The net income has significantly decreased by 576.5% when compared to the same quarter one year ago, falling from -$6.19 million to -$41.85 million.
-- Written by a member of TheStreet Ratings Staff