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) -- RDA Microelectronics (Nasdaq: RDA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including poor profit margins, unimpressive growth in net income and a generally disappointing performance in the stock itself.
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- The revenue growth greatly exceeded the industry average of 12.7%. Since the same quarter one year prior, revenues rose by 40.4%. 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.
- RDA 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. To add to this, RDA has a quick ratio of 1.61, which demonstrates the ability of the company to cover short-term liquidity needs.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RDA has underperformed the S&P 500 Index, declining 14.30% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for RDA MICROELECTRONCS INC -ADR is currently lower than what is desirable, coming in at 31.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 11.55% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff