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) -- PCTEL (Nasdaq: PCTI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share.
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- PCTI's revenue growth has slightly outpaced the industry average of 28.1%. Since the same quarter one year prior, revenues rose by 33.8%. 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.
- PCTI 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 6.07, which clearly demonstrates the ability to cover short-term cash needs.
- 41.93% is the gross profit margin for PCTEL INC which we consider to be strong. Regardless of PCTI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PCTI's net profit margin of 0.61% is significantly lower than the industry average.
- PCTEL INC 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PCTEL INC swung to a loss, reporting -$0.47 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.47).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, PCTEL INC's return on equity significantly trails that of both the industry average and the S&P 500.