NEW YORK (TheStreet) -- Shares of Rackspace Hosting Inc. (RAX) are down - 1.28% to $31.74 after it announced on Tuesday morning that it will provide 'Rackspace Cloud Monitoring' for free for all customers as part of its new strategy.
As part of the plan, the company also introduced "Enhanced Managed Service" cloud levels, and launched a more transparent service-based pricing model.
Separately, TheStreet Ratings team rates RACKSPACE HOSTING INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate RACKSPACE HOSTING INC (RAX) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.2%. Since the same quarter one year prior, revenues rose by 16.2%. 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.
- Although RAX's debt-to-equity ratio of 0.06 is very low, it is currently higher than that of the industry average. To add to this, RAX has a quick ratio of 1.55, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for RACKSPACE HOSTING INC is rather high; currently it is at 66.65%. Regardless of RAX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAX's net profit margin of 6.04% is significantly lower than the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Internet Software & Services industry and the overall market, RACKSPACE HOSTING INC's return on equity is below that of both the industry average and the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RAX has underperformed the S&P 500 Index, declining 13.47% from its price level of one year ago. 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.
- You can view the full analysis from the report here: RAX Ratings Report