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) -- Cbeyond (Nasdaq: CBEY) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.
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- Powered by its strong earnings growth of 50.00% and other important driving factors, this stock has surged by 44.47% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 53.4% when compared to the same quarter one year prior, rising from -$1.19 million to -$0.56 million.
- CBEY's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.
- CBEYOND INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CBEYOND INC continued to lose money by earning -$0.08 versus -$0.27 in the prior year. For the next year, the market is expecting a contraction of 112.5% in earnings (-$0.17 versus -$0.08).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, CBEYOND INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff