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) -- Acacia Research Coroporation (Nasdaq: ACTG) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
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- ACTG 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. Along with this, the company maintains a quick ratio of 6.92, which clearly demonstrates the ability to cover short-term cash needs.
- ACACIA RESEARCH CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ACACIA RESEARCH CORP increased its bottom line by earning $1.28 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($2.34 versus $1.28).
- ACTG, with its decline in revenue, underperformed when compared the industry average of 2.5%. Since the same quarter one year prior, revenues fell by 22.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.70%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 89.90% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, ACTG is still more expensive than most of the other companies in its industry.
- 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 Professional Services industry. The net income has significantly decreased by 89.8% when compared to the same quarter one year ago, falling from $49.93 million to $5.11 million.
-- Written by a member of TheStreet Ratings Staff