Why BroadSoft (BSFT) Stock Is Plummeting Today

NEW YORK (TheStreet) -- Shares of BroadSoft Inc. (BSFT) are down -22.96% to $19.26 on Monday after the company reported a loss in income for the 2014 first quarter.

The net loss was $7.5 million, or 26 cents per basic and diluted common share, compared with a net loss of $2.3 million, or 8 cents per basic and diluted common share, from the year ago quarter.

The communications software services company reported non-GAAP net income was $2.1 million, or 7 cents per diluted common share for the 2014 first quarter, compared to $5.1 million, or 18 cents per diluted common share for the 2013 first quarter.

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The company reported revenue increased 11% for the 2014 first quarter to $43.9 million versus $36.9 million from the same period last year.

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

"We rate BROADSOFT INC (BSFT) 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 revenue growth, 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."

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

  • BSFT's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 13.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.46, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.67 is very high and demonstrates very strong liquidity.
  • The gross profit margin for BROADSOFT INC is currently very high, coming in at 84.15%. Regardless of BSFT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BSFT's net profit margin of 0.98% is significantly lower than the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 89.5% when compared to the same quarter one year ago, falling from $4.88 million to $0.51 million.
  • 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 Software industry and the overall market, BROADSOFT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: BSFT Ratings Report
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