EXFO Inc. Stock Upgraded (EXFO)

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) -- EXFO (Nasdaq: EXFO) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

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Highlights from the ratings report include:
  • 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 202.4% when compared to the same quarter one year prior, rising from -$3.71 million to $3.80 million.
  • EXFO's revenue growth trails the industry average of 28.9%. Since the same quarter one year prior, revenues slightly increased by 6.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • 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. Compared to other companies in the Communications Equipment industry and the overall market, EXFO INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.63 million or 127.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

EXFO Inc. provides next-generation test and service assurance solutions for wireline and wireless network operators and equipment manufacturers in the global telecommunications industry. EXFO has a market cap of $153.4 million and is part of the technology sector and telecommunications industry. Shares are up 1.1% year to date as of the close of trading on Monday.

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

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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