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) -- PCTEL (Nasdaq: PCTI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 176.1% when compared to the same quarter one year prior, rising from $0.27 million to $0.75 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.2%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- 43.20% is the gross profit margin for PCTEL INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PCTI's net profit margin of 2.83% significantly trails the industry average.
- In its most recent trading session, PCTI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- 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 Communications Equipment industry and the overall market, PCTEL INC's return on equity significantly trails that of both the industry average and the S&P 500.