Wi-Lan Inc Stock Upgraded (WILN)

By Kevin Baker 06/04/14 - 11:15 AM EDT

NEW YORK (TheStreet) -- Wi-Lan (Nasdaq:WILN) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust 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 disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
◾ The revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 41.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
◾ Although WILN's debt-to-equity ratio of 0.19 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.88, which clearly demonstrates the ability to cover short-term cash needs.
◾ The gross profit margin for WI-LAN INC is currently very high, coming in at 76.85%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, WILN's net profit margin of 15.27% significantly trails the industry average.
◾ WILN'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 28.48%, 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 company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market, WI-LAN INC's return on equity significantly trails that of both the industry average and the S&P 500.

Wi-LAN Inc., an intellectual property licensing company, develops, acquires, and licenses a range of patented technologies, which are utilized in products in the communications and consumer electronics markets. Wi-Lan has a market cap of $364.6 million and is part of the technology sector and telecommunications industry. Shares are down 9.2% year to date as of the close of trading on Wednesday.