Why AVG (AVG) Is Gaining Today

NEW YORK (TheStreet) -- AVG (AVG) gained 7.1% to $20.58 Wednesday following an upgrade from JMP Securities.

The analyst firm raised its rating for the software company to "outperform" from "market perform." Shares of the company rose to above $20 for the first time since Nov. 6, 2013 as a result of the afternoon upgrade.

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TheStreet Ratings team rates AVG TECHNOLOGIES NV as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AVG TECHNOLOGIES NV (AVG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, increase in stock price during the past year and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Software industry and the overall market, AVG TECHNOLOGIES NV's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The gross profit margin for AVG TECHNOLOGIES NV is currently very high, coming in at 89.01%. Regardless of AVG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AVG's net profit margin of 12.59% is significantly lower than the industry average.
  • Net operating cash flow has decreased to $32.95 million or 20.02% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The debt-to-equity ratio is very high at 3.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
  • You can view the full analysis from the report here: AVG Ratings Report

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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.

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