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"We rate ZIX CORP (ZIXI) 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 revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and feeble growth in the company's earnings per share."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ZIXI's revenue growth trails the industry average of 27.4%. Since the same quarter one year prior, revenues slightly increased by 3.9%. 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.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, ZIX CORP's return on equity exceeds that of both the industry average and the S&P 500.
- ZIXI 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
- 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 63.4% when compared to the same quarter one year ago, falling from $3.18 million to $1.16 million.
- Net operating cash flow has decreased to $4.74 million or 23.85% 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.
- You can view the full analysis from the report here: ZIXI Ratings Report