NEW YORK ( TheStreet) -- EXFO (Nasdaq: EXFO) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
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- 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. Compared to other companies in the Communications Equipment industry and the overall market, EXFO INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $1.34 million or 52.78% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- EXFO has underperformed the S&P 500 Index, declining 15.39% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- EXFO INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, EXFO INC swung to a loss, reporting -$0.05 versus $0.11 in the prior year.
- EXFO, with its decline in revenue, underperformed when compared the industry average of 21.0%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.