NEW YORK (TheStreet) -- Shares of NeuStar  (NSR) are declining, lower by 0.58% to $22.12 on heavy volume Thursday morning, on reports that the U.S. Federal Communications Commission may drop the company, and be replaced by Ericsson (ERIC) subsidiary Telcordia Technologies as its new contractor, according to Reuters.

Under the exclusive government contract, which expires on June 30, NeuStar has been helping telephone carriers route calls and text messages. The deal with the government accounts for about half of the company's revenues, Reuters reports.

The FCC said the Ericsson subsidiary had "extensive experience" in numbering administration.

But this morning, analysts at William Blair said NeuStar shares remain "significantly undervalued" despite the possibility of losing the FCC contract.

The firm said they believe investors may not be fully appreciating the value of NeuStar's non-NPAC businesses, which is growing in the double digits.

Blair maintained its "outperform" rating on shares of the cloud-based information services and data analytics provider.

About 1.46 million shares of NeuStar have exchanged hands as of 10:42 a.m. ET today, compared to its average trading volume of about 1.26 million shares a day.

Sterling, VA-based Neustar is a provider of cloud-based information services and data analytics, enabling marketing and IT security professionals.

Neustar operates complex data registries and uses its expertise to deliver data-driven insights that help clients make business decisions in real time, serving more than 14,000 customers globally.

Separately, TheStreet Ratings team rates NEUSTAR INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate NEUSTAR INC (NSR) 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, attractive valuation levels and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 6.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NEUSTAR INC has improved earnings per share by 39.0% 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. This trend suggests that the performance of the business is improving. During the past fiscal year, NEUSTAR INC increased its bottom line by earning $2.77 versus $2.47 in the prior year. This year, the market expects an improvement in earnings ($4.35 versus $2.77).
  • The gross profit margin for NEUSTAR INC is currently very high, coming in at 74.30%. 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 18.61% trails the industry average.
  • The debt-to-equity ratio of 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, NSR has managed to keep a strong quick ratio of 2.42, which demonstrates the ability to cover short-term cash needs.
  • 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. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, NEUSTAR INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • You can view the full analysis from the report here: NSR Ratings Report