United Online Inc. Stock Downgraded (UNTD)

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) -- United Online (Nasdaq: UNTD) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

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Highlights from the ratings report include:
  • Compared to its closing price of one year ago, UNTD's share price has jumped by 72.77%, exceeding the performance of the broader market during that same time frame. 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 revenue growth significantly trails the industry average of 203.9%. Since the same quarter one year prior, revenues slightly increased by 2.1%. 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.
  • 45.70% is the gross profit margin for UNITED ONLINE INC which we consider to be strong. Regardless of UNTD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.09% trails the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market on the basis of return on equity, UNITED ONLINE INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has decreased to $15.15 million or 10.24% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
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United Online, Inc., through its subsidiaries, provides consumer products and services over the Internet primarily in the United States, Canada, and Europe. The company operates in three segments: FTD, Content and Media, and Communications. The company has a P/E ratio of 61.8, above the S&P 500 P/E ratio of 17.7. United Online has a market cap of $628.1 million and is part of the services sector and specialty retail industry. Shares are up 21.6% year to date as of the close of trading on Friday.

You can view the full United Online Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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