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) -- F5 Networks (Nasdaq: FFIV) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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- F5 NETWORKS INC has improved earnings per share by 6.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, F5 NETWORKS INC increased its bottom line by earning $3.45 versus $2.97 in the prior year. This year, the market expects an improvement in earnings ($4.59 versus $3.45).
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.2%. Since the same quarter one year prior, revenues rose by 13.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $144.81 million or 9.80% when compared to the same quarter last year. Despite an increase in cash flow, F5 NETWORKS INC's average is still marginally south of the industry average growth rate of 13.20%.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Communications Equipment industry average, but is greater than that of the S&P 500. The net income increased by 4.5% when compared to the same quarter one year prior, going from $66.49 million to $69.49 million.
- FFIV's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 46.15%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, FFIV is still more expensive than most of the other companies in its industry.
-- Written by a member of TheStreet Ratings Staff