NEW YORK (TheStreet) -- Shares of QLogic Corp. (QLGC) are up 3.53% to $10.57 after Morgan Stanley (MS) upgraded its rating to "equal weight" from "underweight" on the expectation enterprise server unit growth will accelerate into 2015.
Must Read: Warren Buffett's 25 Favorite Stocks
TheStreet Ratings team rates QLOGIC CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate QLOGIC CORP (QLGC) 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 largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. 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:
- QLGC 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 4.36, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for QLOGIC CORP is currently very high, coming in at 74.32%. 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 -40.42% is in-line with the industry average.
- QLGC, with its decline in revenue, slightly underperformed the industry average of 2.2%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Computers & Peripherals industry and the overall market, QLOGIC CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$21.24 million or 386.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: QLGC Ratings Report