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) -- Compuware Corporation (Nasdaq: CPWR) 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 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.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- CPWR 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for COMPUWARE CORP is currently very high, coming in at 71.03%. Regardless of CPWR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CPWR's net profit margin of 9.98% is significantly lower than the industry average.
- Net operating cash flow has declined marginally to $32.16 million or 1.48% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, COMPUWARE CORP has marginally lower results.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Software industry and the overall market, COMPUWARE CORP's return on equity significantly trails that of both the industry average and the S&P 500.