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) -- Mitel Networks Corporation (Nasdaq: MITL) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and a generally disappointing performance in the stock itself.
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- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, MITEL NETWORKS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for MITEL NETWORKS CORP is rather high; currently it is at 61.80%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MITL's net profit margin of 1.47% significantly trails the industry average.
- Net operating cash flow has increased to $17.30 million or 12.33% when compared to the same quarter last year. Despite an increase in cash flow, MITEL NETWORKS CORP's average is still marginally south of the industry average growth rate of 13.84%.
- MITL has underperformed the S&P 500 Index, declining 18.74% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 Communications Equipment industry. The net income has significantly decreased by 54.3% when compared to the same quarter one year ago, falling from $4.60 million to $2.10 million.
-- Written by a member of TheStreet Ratings Staff