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) -- Zhone Technologies (Nasdaq: ZHNE) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that revenues have generally been declining.
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- Powered by its strong earnings growth of 142.85% and other important driving factors, this stock has surged by 278.78% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 150.2% when compared to the same quarter one year prior, rising from -$2.10 million to $1.06 million.
- 38.95% is the gross profit margin for ZHONE TECHNOLOGIES INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ZHNE's net profit margin of 3.51% significantly trails the industry average.
- The revenue fell significantly faster than the industry average of 28.2%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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 Communications Equipment industry and the overall market, ZHONE TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.