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) -- KongZhong Corporation (Nasdaq: KONG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
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- KONG 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 2.64, which clearly demonstrates the ability to cover short-term cash needs.
- 45.32% is the gross profit margin for KONGZHONG CORP -ADR which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -6.08% is in-line with the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Software industry and the overall market, KONGZHONG CORP -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to $4.49 million or 68.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.