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 down 0.3% versus the S&P 500, which was unchanged. Laggards within the Computer Software & Services industry included TigerLogic ( TIGR), down 11.4%, TSR ( TSRI), down 2.8%, One Horizon Group ( OHGI), down 13.5%, Bridgeline Digital ( BLIN), down 1.6% and GSE Systems ( GVP), down 3.4%.

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

Igate ( IGTE) is one of the companies that pushed the Computer Software & Services industry lower today. Igate was down $0.65 (1.7%) to $37.03 on light volume. Throughout the day, 52,979 shares of Igate exchanged hands as compared to its average daily volume of 215,900 shares. The stock ranged in price between $36.92-$37.98 after having opened the day at $37.62 as compared to the previous trading day's close of $37.68.

iGATE Corporation, through its subsidiaries, provides information technology (IT) and IT-enabled operations, and offshore outsourcing solutions and services to large and medium-size organizations. Igate has a market cap of $2.2 billion and is part of the technology sector. Shares are down 6.2% year-to-date as of the close of trading on Wednesday. Currently there are 6 analysts who rate Igate a buy, no analysts rate it a sell, and 2 rate it a hold.

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TheStreet Ratings rates Igate as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from TheStreet Ratings analysis on IGTE go as follows:

  • The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 10.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • IGATE CORP has improved earnings per share by 17.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, IGATE CORP increased its bottom line by earning $1.65 versus $1.12 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.65).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the IT Services industry average. The net income increased by 17.0% when compared to the same quarter one year prior, going from $31.90 million to $37.31 million.
  • Even though the current debt-to-equity ratio is 1.06, it is still below the industry average, suggesting that this level of debt is acceptable within the IT Services industry. Despite the fact that IGTE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.07 is high and demonstrates strong liquidity.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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

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At the close, GSE Systems ( GVP) was down $0.05 (3.4%) to $1.41 on light volume. Throughout the day, 17,376 shares of GSE Systems exchanged hands as compared to its average daily volume of 29,600 shares. The stock ranged in price between $1.34-$1.47 after having opened the day at $1.47 as compared to the previous trading day's close of $1.46.

GSE Systems, Inc. provides simulation, educational, and engineering solutions and services to the nuclear and fossil electric utility industry, and the chemical and petrochemical industries worldwide. GSE Systems has a market cap of $26.5 million and is part of the technology sector. Shares are down 7.5% year-to-date as of the close of trading on Wednesday.

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TheStreet Ratings rates GSE Systems as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on GVP go as follows:

  • Net operating cash flow has significantly decreased to -$2.32 million or 160.43% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for GSE SYSTEMS INC is currently lower than what is desirable, coming in at 32.75%. Regardless of GVP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GVP's net profit margin of -23.99% significantly underperformed when compared to the industry average.
  • GVP has underperformed the S&P 500 Index, declining 13.26% from its price level of one year ago. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, GSE SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • GSE SYSTEMS INC 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, GSE SYSTEMS INC swung to a loss, reporting -$0.58 versus $0.06 in the prior year.

You can view the full analysis from the report here: GSE Systems 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.

Bridgeline Digital ( BLIN) was another company that pushed the Computer Software & Services industry lower today. Bridgeline Digital was down $0.01 (1.6%) to $0.63 on light volume. Throughout the day, 11,390 shares of Bridgeline Digital exchanged hands as compared to its average daily volume of 35,200 shares. The stock ranged in price between $0.61-$0.67 after having opened the day at $0.63 as compared to the previous trading day's close of $0.64.

Bridgeline Digital, Inc. develops iAPPS Web engagement management product platform and related digital solutions in the United States. Its iAPPS platform enables companies and developers to create Websites, Web applications, and online stores. Bridgeline Digital has a market cap of $14.7 million and is part of the technology sector. Shares are down 39.6% year-to-date as of the close of trading on Wednesday. Currently there is 1 analyst who rates Bridgeline Digital a buy, no analysts rate it a sell, and none rate it a hold.

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

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Highlights from TheStreet Ratings analysis on BLIN 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 Internet Software & Services industry and the overall market, BRIDGELINE DIGITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • BLIN'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 28.09%, 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.
  • BRIDGELINE DIGITAL INC has improved earnings per share by 40.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BRIDGELINE DIGITAL INC reported poor results of -$0.23 versus -$0.07 in the prior year. For the next year, the market is expecting a contraction of 26.1% in earnings (-$0.29 versus -$0.23).
  • Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.95 is weak.
  • Net operating cash flow has increased to -$1.22 million or 14.87% when compared to the same quarter last year. Despite an increase in cash flow, BRIDGELINE DIGITAL INC's cash flow growth rate is still lower than the industry average growth rate of 25.25%.

You can view the full analysis from the report here: Bridgeline Digital 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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