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) -- Sapient Corporation (Nasdaq: SAPE) 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
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- The revenue growth came in higher than the industry average of 13.1%. Since the same quarter one year prior, revenues rose by 12.6%. 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.
- SAPE 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. To add to this, SAPE has a quick ratio of 2.05, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 IT Services industry. The net income has significantly decreased by 26.0% when compared to the same quarter one year ago, falling from $8.89 million to $6.58 million.
- 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. In comparison to the other companies in the IT Services industry and the overall market, SAPIENT CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
-- Written by a member of TheStreet Ratings Staff