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) -- Qihoo 360 Technology (NYSE: QIHU) 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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- QIHU's very impressive revenue growth greatly exceeded the industry average of 22.8%. Since the same quarter one year prior, revenues leaped by 108.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- QIHU 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 2.89, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for QIHOO 360 TECHNOLGY CO -ADR is currently very high, coming in at 94.63%. Regardless of QIHU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 21.75% trails the industry average.
- Powered by its strong earnings growth of 333.33% and other important driving factors, this stock has surged by 277.32% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Internet Software & Services industry and the overall market, QIHOO 360 TECHNOLGY CO -ADR's return on equity is below that of both the industry average and the S&P 500.