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NEW YORK (TheStreet) -- Procera Networks (PKT) has been downgraded by TheStreet Ratings from Hold to Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PROCERA NETWORKS INC (PKT) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, PROCERA NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- PKT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 59.12%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The gross profit margin for PROCERA NETWORKS INC is rather high; currently it is at 61.71%. Regardless of PKT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PKT's net profit margin of -6.83% significantly underperformed when compared to the industry average.
- PROCERA NETWORKS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PROCERA NETWORKS INC swung to a loss, reporting -$0.81 versus $0.28 in the prior year. This year, the market expects an improvement in earnings (-$0.28 versus -$0.81).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 57.1% when compared to the same quarter one year prior, rising from -$3.28 million to -$1.41 million.
- You can view the full analysis from the report here: PKT Ratings Report