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) -- Infosys (NYSE: INFY) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.
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- The revenue growth came in higher than the industry average of 13.8%. Since the same quarter one year prior, revenues slightly increased by 9.4%. 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.
- INFY 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. Along with this, the company maintains a quick ratio of 5.26, which clearly demonstrates the ability to cover short-term cash needs.
- INFOSYS LTD' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, INFOSYS LTD increased its bottom line by earning $3.02 versus $3.00 in the prior year. For the next year, the market is expecting a contraction of 3.0% in earnings ($2.93 versus $3.02).
- The gross profit margin for INFOSYS LTD is currently lower than what is desirable, coming in at 34.90%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 22.91% is above that of the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the IT Services industry average. The net income has decreased by 4.1% when compared to the same quarter one year ago, dropping from $463.00 million to $444.00 million.
-- Written by a member of TheStreet Ratings Staff