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) -- Sprint Nextel (NYSE: S) has been reiterated by TheStreet Ratings as a hold with a ratings score of C-. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and generally higher debt management risk.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 25.5% when compared to the same quarter one year prior, rising from -$863.00 million to -$643.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 0.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SPRINT NEXTEL CORP has improved earnings per share by 27.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SPRINT NEXTEL CORP reported poor results of -$1.45 versus -$0.96 in the prior year. This year, the market expects an improvement in earnings (-$0.84 versus -$1.45).
- The debt-to-equity ratio is very high at 3.78 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, S's quick ratio is somewhat strong at 1.30, demonstrating the ability to handle short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, SPRINT NEXTEL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
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