Why Brocade Communications (BRCD) Stock Is A 'Buy' At TheStreet

NEW YORK (TheStreet) --  TheStreet Ratings team rates Brocade Communications (BRCD) as a "buy" with a ratings score of B.

Shares of Brocade Communications are higher by 5.71% to $9.73 on heavy volume in early afternoon trading on Tuesday.

TheStreet Ratings Team has this to say about their recommendation:

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"We rate BROCADE COMMUNICATIONS SYS (BRCD) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Compared to its closing price of one year ago, BRCD's share price has jumped by 64.07%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • Although BRCD's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.55, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $168.24 million or 40.65% when compared to the same quarter last year. In addition, BROCADE COMMUNICATIONS SYS has also vastly surpassed the industry average cash flow growth rate of -10.85%.
  • The gross profit margin for BROCADE COMMUNICATIONS SYS is rather high; currently it is at 69.88%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -2.54% is in-line with the industry average.
  • You can view the full analysis from the report here: BRCD Ratings Report
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