11 High-Growth Tech Stocks to Avoid in 2016

Growth stocks have the potential to offer high returns, but the risks may be too steep for some investors.

Yet, some tech sector stocks that you should avoid are alluring. A company that develops a new technology or cure for a disease could see its stock price rise quickly in a relatively short period of time -- aka, growth. At the same time, there are plenty of things that can go wrong with an emerging technology or with the company running it.

Here are 11 high-growth tech stocks that are rated "hold" or "sell" by TheStreet Ratings, TheStreet's proprietary ratings tool. These stocks have high growth rates via their revenue, cash flow and earnings, according to TheStreet Ratings. TheStreet included trailing 12-month revenue growth, net income growth and EPS growth on each company for comparison. And when you're done be sure to check out the 12 high-growth tech stocks to buy for 2016

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

AZPN Chart AZPN data by YCharts

1. Aspen Technology Inc. (AZPN)
Industry: Technology/Application Software
Market Cap: $3.4 billion
Year-to-date Return: 18%

12-Month Revenue Growth: 12.50%
12-Month Net Income Growth: 38.03%
12-Month EPS Growth: 45.65%

TheStreet Said: TheStreet Ratings team rates ASPEN TECHNOLOGY INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

We rate ASPEN TECHNOLOGY INC (AZPN) a SELL. This is driven by a few notable 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. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

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

  • Net operating cash flow has declined marginally to $53.57 million or 8.02% when compared to the same quarter last year. Despite a decrease in cash flow of 8.02%, ASPEN TECHNOLOGY INC is in line with the industry average cash flow growth rate of -11.94%.
  • The gross profit margin for ASPEN TECHNOLOGY INC is currently very high, coming in at 90.35%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 26.97% is above that of the industry average.
  • The stock has risen over the past year at a faster pace than the S&P 500, reflecting the earnings growth of the company. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
  • ASPEN TECHNOLOGY INC has improved earnings per share by 24.1% 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, ASPEN TECHNOLOGY INC increased its bottom line by earning $1.34 versus $0.92 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $1.34).
  • 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 15.5% when compared to the same quarter one year prior, going from $26.68 million to $30.81 million.
  • You can view the full analysis from the report here: AZPN

 

BELFA Chart BELFA data by YCharts

2. Bel Fuse Inc. (BELFA)
Industry: Technology/Communications Equipment
Market Cap: $215 million
Year-to-date Return: -27.8%

12-Month Revenue Growth: 35.17%
12-Month Net Income Growth: 28.78%
12-Month EPS Growth: 24.19%

TheStreet Said: TheStreet Ratings team rates BEL FUSE INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate BEL FUSE INC (BELFA) 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 compelling growth in net income, attractive valuation levels and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

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

  • 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 290.2% when compared to the same quarter one year prior, rising from $1.26 million to $4.92 million.
  • 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 Communications Equipment industry and the overall market on the basis of return on equity, BEL FUSE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • BELFA'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 37.12%, 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 BEL FUSE INC is rather low; currently it is at 22.85%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.41% significantly trails the industry average.
  • You can view the full analysis from the report here: BELFA

 

CDW Chart CDW data by YCharts

3. CDW Corp. (CDW)
Industry: Technology/Technology Distributors
Market Cap: $7.2 billion
Year-to-date Return: 21.3%

12-Month Revenue Growth: 7.52%
12-Month Net Income Growth: 44.44%
12-Month EPS Growth: 44.89%

TheStreet Said: TheStreet Ratings team rates CDW CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate CDW CORP (CDW) 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

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

  • CDW's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 7.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 175.00% and other important driving factors, this stock has surged by 31.22% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although CDW had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • The gross profit margin for CDW CORP is rather low; currently it is at 17.91%. Regardless of CDW's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.31% trails the industry average.
  • The debt-to-equity ratio is very high at 3.04 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, CDW's quick ratio is somewhat strong at 1.17, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: CDW

ENV Chart ENV data by YCharts

4. Envestnet Inc. (ENV)
Industry: Technology/Internet Software & Services
Market Cap: $1.2 billion
Year-to-date Return: -34.3%

12-Month Revenue Growth: 22.35%
12-Month Net Income Growth: 7.74%
12-Month EPS Growth: 10%

TheStreet Said: TheStreet Ratings team rates ENVESTNET INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate ENVESTNET INC (ENV) 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 robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and disappointing return on equity.

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

  • ENV's revenue growth has slightly outpaced the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 16.7%. 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.
  • Net operating cash flow has increased to $21.18 million or 25.07% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.04%.
  • ENV's debt-to-equity ratio of 0.60 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.35 is very high and demonstrates very strong liquidity.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Internet Software & Services industry average, but is greater than that of the S&P 500. The net income has decreased by 12.4% when compared to the same quarter one year ago, dropping from $3.77 million to $3.30 million.
  • 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. When compared to other companies in the Internet Software & Services industry and the overall market, ENVESTNET INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ENV

 

MBLY Chart MBLY data by YCharts

5. Mobileye N.V. (MBLY)
Industry: Technology/Application Software
Market Cap: $9.1 billion
Year-to-date Return: 3.3%

12-Month Revenue Growth: 205.44%
12-Month Net Income Growth: 502.54%
12-Month EPS Growth: 450%

TheStreet Said: TheStreet Ratings team rates MOBILEYE NV as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

We rate MOBILEYE NV (MBLY) a SELL. This is driven by multiple 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 generally disappointing historical performance in the stock itself and premium valuation.

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

  • MBLY has underperformed the S&P 500 Index, declining 9.28% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The gross profit margin for MOBILEYE NV is currently very high, coming in at 75.49%. Regardless of MBLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MBLY's net profit margin of 34.27% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 141.39% to $26.22 million when compared to the same quarter last year. In addition, MOBILEYE NV has also vastly surpassed the industry average cash flow growth rate of -10.48%.
  • MBLY 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 this, the company maintains a quick ratio of 4.50, which clearly demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: MBLY

 

NSR Chart NSR data by YCharts

6. NeuStar Inc. (NSR)
Industry: Technology/Data Processing & Outsourced Services
Market Cap: $1.2 billion
Year-to-date Return: -16.4%

12-Month Revenue Growth: 7.72%
12-Month Net Income Growth: 21.83%
12-Month EPS Growth: 31.49%

TheStreet Said: 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, growth in earnings per share and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

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

  • The revenue growth greatly exceeded the industry average of 27.0%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NEUSTAR INC has improved earnings per share by 8.3% 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 ($4.59 versus $2.77).
  • Net operating cash flow has remained constant at $85.73 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -11.39%.
  • 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.
  • NSR has underperformed the S&P 500 Index, declining 11.59% 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.
  • You can view the full analysis from the report here: NSR

RAX Chart RAX data by YCharts

7. Rackspace Hosting Inc. (RAX)
Industry: Technology/Internet Software & Services
Market Cap: $3.7 billion
Year-to-date Return: -42%

12-Month Revenue Growth: 12.76%
12-Month Net Income Growth: 38.73%
12-Month EPS Growth: 39.39%

TheStreet Said: TheStreet Ratings team rates RACKSPACE HOSTING INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate RACKSPACE HOSTING INC (RAX) 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 impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

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

  • RACKSPACE HOSTING INC has improved earnings per share by 44.4% 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, RACKSPACE HOSTING INC increased its bottom line by earning $0.78 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($0.89 versus $0.78).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Internet Software & Services industry average. The net income increased by 41.8% when compared to the same quarter one year prior, rising from $25.74 million to $36.50 million.
  • Although RAX's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. 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.
  • RAX'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 31.98%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Net operating cash flow has decreased to $111.40 million or 11.18% 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: RAX

 

SMI Chart SMI data by YCharts

8. Semiconductor Manufacturing International Corp. (SMI)
Industry: Technology/Semiconductors
Market Cap: $4.6 billion
Year-to-date Return: 21%

12-Month Revenue Growth: 6.89%
12-Month Net Income Growth: 74.62%
12-Month EPS Growth: 55%

TheStreet Said: TheStreet Ratings team rates SEMICONDUCTOR MFG INTL CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate SEMICONDUCTOR MFG INTL CORP (SMI) 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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

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

  • The revenue growth came in higher than the industry average of 10.8%. Since the same quarter one year prior, revenues slightly increased by 9.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SMI's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • 48.55% is the gross profit margin for SEMICONDUCTOR MFG INTL CORP which we consider to be strong. 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 14.49% trails the industry average.
  • SEMICONDUCTOR MFG INTL CORP has improved earnings per share by 42.9% 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, SEMICONDUCTOR MFG INTL CORP reported lower earnings of $0.22 versus $0.27 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus $0.22).
  • 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. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SEMICONDUCTOR MFG INTL CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: SMI

 

SWI Chart SWI data by YCharts

9. SolarWinds Inc. (SWI)
Industry: Technology/Application Software
Market Cap: $4.2 billion
Year-to-date Return: 16.8%

12-Month Revenue Growth: 19.28%
12-Month Net Income Growth: 18.32%
12-Month EPS Growth: 17.82%

TheStreet Said: TheStreet Ratings team rates SOLARWINDS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate SOLARWINDS INC (SWI) 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 robust revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.

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

  • The revenue growth greatly exceeded the industry average of 17.3%. Since the same quarter one year prior, revenues rose by 16.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • SOLARWINDS INC has improved earnings per share by 12.5% 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, SOLARWINDS INC reported lower earnings of $1.03 versus $1.18 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.03).
  • The gross profit margin for SOLARWINDS INC is currently very high, coming in at 96.79%. Regardless of SWI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.52% trails the industry average.
  • You can view the full analysis from the report here: SWI

UMC Chart UMC data by YCharts

10. United Microelectronics Group (UMC)
Industry: Technology/Semiconductors
Market Cap: $4.5 billion
Year-to-date Return: -18.9%

12-Month Revenue Growth: 4.10%
12-Month Net Income Growth: 58.70%
12-Month EPS Growth: 72.72%

TheStreet Said: TheStreet Ratings team rates UNITED MICROELECTRONICS CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate UNITED MICROELECTRONICS CORP (UMC) 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, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

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

  • The revenue growth came in higher than the industry average of 10.8%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • UMC's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, UMC has a quick ratio of 2.00, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for UNITED MICROELECTRONICS CORP is rather high; currently it is at 52.44%. 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 12.50% trails the industry average.
  • 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. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, UNITED MICROELECTRONICS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • UMC has underperformed the S&P 500 Index, declining 12.56% 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.
  • You can view the full analysis from the report here: UMC

 

VMW Chart VMW data by YCharts

11. VMware Inc. (VMW)
Industry: Technology/Systems Software
Market Cap: $25 billion
Year-to-date Return: -28.1%

12-Month Revenue Growth: 11.43%
12-Month Net Income Growth: 6.03%
12-Month EPS Growth: 6.79%

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

We rate VMWARE INC (VMW) 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, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

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

  • The revenue growth came in higher than the industry average of 17.3%. Since the same quarter one year prior, revenues rose by 10.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VMW's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, VMW has a quick ratio of 2.20, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 Software industry and the overall market on the basis of return on equity, VMWARE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • VMW'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 31.88%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Net operating cash flow has decreased to $412.00 million or 32.01% 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: VMW

 

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