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) -- Tucows (Nasdaq: TCX) 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, solid stock price performance and reasonable valuation levels. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.
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- TCX's revenue growth has slightly outpaced the industry average of 17.2%. Since the same quarter one year prior, revenues rose by 21.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 55.61% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Although TCX's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.22 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, TUCOWS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for TUCOWS INC is currently lower than what is desirable, coming in at 28.55%. Regardless of TCX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TCX's net profit margin of 7.27% is significantly lower than the industry average.