Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Mobile Telesystems OJSC (NYSE: MBT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and expanding profit margins. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 226.3% when compared to the same quarter one year prior, rising from -$681.76 million to $861.38 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, MOBILE TELESYSTEMS OJSC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- MBT, with its decline in revenue, slightly underperformed the industry average of 2.1%. Since the same quarter one year prior, revenues fell by 10.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The debt-to-equity ratio is very high at 2.02 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, MBT maintains a poor quick ratio of 0.80, which illustrates the inability to avoid short-term cash problems.