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) -- Applied Materials (Nasdaq: AMAT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its 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 we feel that the company's cash flow from its operations has been weak overall.
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- The revenue growth greatly exceeded the industry average of 10.0%. Since the same quarter one year prior, revenues rose by 20.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although AMAT's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
- Powered by its strong earnings growth of 135.71% and other important driving factors, this stock has surged by 50.31% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- 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 Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, APPLIED MATERIALS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has significantly decreased to $19.00 million or 95.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.