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) -- Digital River (Nasdaq: DRIV) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.
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- DRIV's revenue growth trails the industry average of 31.5%. Since the same quarter one year prior, revenues rose by 11.0%. 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.
- Net operating cash flow has significantly increased by 55.57% to -$10.25 million when compared to the same quarter last year. In addition, DIGITAL RIVER INC has also vastly surpassed the industry average cash flow growth rate of -1.04%.
- DRIV's debt-to-equity ratio of 0.74 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that DRIV's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.49 is high and demonstrates strong liquidity.
- 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 Internet Software & Services industry. The net income has significantly decreased by 339.9% when compared to the same quarter one year ago, falling from $4.74 million to -$11.37 million.
- 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 Internet Software & Services industry and the overall market, DIGITAL RIVER INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff