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NEW YORK ( TheStreet) -- United Microelectronics (NYSE: UMC) 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 reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 13.3%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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.
  • Although UMC's debt-to-equity ratio of 0.25 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.31, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for UNITED MICROELECTRONICS CORP is rather high; currently it is at 50.44%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, UMC's net profit margin of 5.60% significantly trails the industry average.
  • The share price of UNITED MICROELECTRONICS CORP has not done very well: it is down 7.31% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 40.5% when compared to the same quarter one year ago, falling from $99.87 million to $59.38 million.

United Microelectronics Corporation provides semiconductor wafer foundry solutions. The company offers wafer manufacturing services and other solutions to address the needs of foundry customers. United Microelectronics has a market cap of $5.26 billion and is part of the technology sector and electronics industry. Shares are up 0.5% year to date as of the close of trading on Thursday.

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

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