3 Stocks Pushing The Computer Software & Services Industry Lower

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.

The Computer Software & Services industry as a whole closed the day up 1.8% versus the S&P 500, which was down 0.1%. Laggards within the Computer Software & Services industry included FalconStor Software ( FALC), down 3.7%, Bsquare ( BSQR), down 1.9%, ARI Network Services ( ARIS), down 4.7%, GigaMedia ( GIGM), down 1.9% and Sphere 3D ( ANY), down 1.9%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

GigaMedia ( GIGM) is one of the companies that pushed the Computer Software & Services industry lower today. GigaMedia was down $0.02 (1.9%) to $0.97 on light volume. Throughout the day, 80,094 shares of GigaMedia exchanged hands as compared to its average daily volume of 165,400 shares. The stock ranged in price between $0.96-$0.98 after having opened the day at $0.96 as compared to the previous trading day's close of $0.99.

Gigamedia Limited, through its subsidiaries, operates online games for online game players; and cloud computing software and services business in Taiwan and internationally. GigaMedia has a market cap of $51.5 million and is part of the technology sector. Shares are down 0.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates GigaMedia as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on GIGM go as follows:

  • GIGAMEDIA LTD's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, GIGAMEDIA LTD reported poor results of -$0.68 versus -$0.26 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 3286.9% when compared to the same quarter one year ago, falling from $0.08 million to -$2.68 million.
  • 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 Internet Software & Services industry and the overall market, GIGAMEDIA LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • This stock has managed to decline in share value by 2.13% over the past twelve months. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 36.22% is the gross profit margin for GIGAMEDIA LTD which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, GIGM's net profit margin of -108.33% significantly underperformed when compared to the industry average.

You can view the full analysis from the report here: GigaMedia Ratings Report

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At the close, Bsquare ( BSQR) was down $0.07 (1.9%) to $3.72 on heavy volume. Throughout the day, 55,471 shares of Bsquare exchanged hands as compared to its average daily volume of 22,300 shares. The stock ranged in price between $3.65-$3.81 after having opened the day at $3.81 as compared to the previous trading day's close of $3.79.

BSQUARE Corporation provides software solutions and related engineering services to companies that develop smart connected systems in North America, Asia, Europe, and internationally. Bsquare has a market cap of $44.1 million and is part of the technology sector. Shares are up 5.9% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates Bsquare as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and poor profit margins.

Highlights from TheStreet Ratings analysis on BSQR go as follows:

  • 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 Software industry and the overall market, BSQUARE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for BSQUARE CORP is rather low; currently it is at 16.27%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.72% is significantly below that of the industry average.
  • BSQUARE CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BSQUARE CORP swung to a loss, reporting -$0.47 versus $0.07 in the prior year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 54.4% when compared to the same quarter one year prior, rising from -$0.86 million to -$0.39 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.5%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

You can view the full analysis from the report here: Bsquare Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

FalconStor Software ( FALC) was another company that pushed the Computer Software & Services industry lower today. FalconStor Software was down $0.05 (3.7%) to $1.31 on light volume. Throughout the day, 24,440 shares of FalconStor Software exchanged hands as compared to its average daily volume of 59,200 shares. The stock ranged in price between $1.29-$1.36 after having opened the day at $1.34 as compared to the previous trading day's close of $1.36.

FalconStor Software, Inc. develops, manufactures, and sells data migration, business continuity, disaster recovery, optimized backup, and de-duplication solutions worldwide. FalconStor Software has a market cap of $61.5 million and is part of the technology sector. Shares are up 0.7% year-to-date as of the close of trading on Friday.

TheStreet Ratings rates FalconStor Software as a sell. The area that we feel has been the company's primary weakness has been its declining revenues.

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Highlights from TheStreet Ratings analysis on FALC go as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, FALCONSTOR SOFTWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 11.5%. Since the same quarter one year prior, revenues fell by 19.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for FALCONSTOR SOFTWARE INC is currently very high, coming in at 81.36%. 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 11.77% trails the industry average.
  • Net operating cash flow has significantly increased by 121.80% to $1.10 million when compared to the same quarter last year. In addition, FALCONSTOR SOFTWARE INC has also vastly surpassed the industry average cash flow growth rate of 41.51%.
  • FALC 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.

You can view the full analysis from the report here: FalconStor Software Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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