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) -- Datalink Corporation (Nasdaq: DTLK) 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 increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
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- The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 33.2%. 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.
- DTLK's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.
- DATALINK CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, DATALINK CORP's EPS of $0.59 remained unchanged from the prior years' EPS of $0.59. This year, the market expects an improvement in earnings ($0.83 versus $0.59).
- The gross profit margin for DATALINK CORP is rather low; currently it is at 21.75%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.59% significantly trails the industry average.
- Net operating cash flow has significantly decreased to -$3.29 million or 154.57% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.