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) -- Immersion (Nasdaq: IMMR) 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, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
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- IMMR's revenue growth has slightly outpaced the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 11.4%. 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.
- IMMR 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 this, the company maintains a quick ratio of 2.74, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for IMMERSION CORP is currently very high, coming in at 99.09%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, IMMR's net profit margin of 12.07% significantly trails the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, IMMR has underperformed the S&P 500 Index, declining 24.00% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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 Computers & Peripherals industry. The net income has decreased by 17.3% when compared to the same quarter one year ago, dropping from $2.25 million to $1.86 million.