Aruba Networks Inc Stock Upgraded (ARUN)

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) -- Aruba Networks (Nasdaq: ARUN) has been upgraded by TheStreet Ratings from sell to hold. 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 increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow.

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Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 32.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ARUN 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. To add to this, ARUN has a quick ratio of 1.62, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for ARUBA NETWORKS INC is rather high; currently it is at 68.95%. Regardless of ARUN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARUN's net profit margin of -2.01% significantly underperformed when compared to the industry average.
  • Net operating cash flow has decreased to $30.73 million or 32.18% 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.
  • 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. Compared to other companies in the Communications Equipment industry and the overall market, ARUBA NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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