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) -- NetApp (Nasdaq: NTAP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.
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- NETAPP INC has improved earnings per share by 25.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NETAPP INC increased its bottom line by earning $1.85 versus $1.37 in the prior year. This year, the market expects an improvement in earnings ($2.97 versus $1.85).
- The gross profit margin for NETAPP INC is rather high; currently it is at 68.17%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, NTAP's net profit margin of 11.94% significantly trails the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Computers & Peripherals industry average, but is less than that of the S&P 500. The net income increased by 13.3% when compared to the same quarter one year prior, going from $173.80 million to $197.00 million.
- Net operating cash flow has decreased to $369.50 million or 18.89% 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.
- In its most recent trading session, NTAP 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, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.