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) -- AthenaHealth (Nasdaq: ATHN) 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, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and premium valuation.
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- The revenue growth came in higher than the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 30.1%. 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.
- Compared to its closing price of one year ago, ATHN's share price has jumped by 28.33%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The gross profit margin for ATHENAHEALTH INC is rather high; currently it is at 59.00%. Regardless of ATHN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ATHN's net profit margin of 0.55% is significantly lower than the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Health Care Technology industry and the overall market, ATHENAHEALTH INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff