Extreme Networks (EXTR) Stock Is Down Today on Heavy Trading Volume

NEW YORK (TheStreet) -- Shares of Extreme Networks were falling 2.4% to $2.44 on heavy trading volume Monday, continuing the networking and communication devices company's losses from the previous week. About 2 million shares of Extreme Networks were traded by 12:47 p.m. Monday, above the company's average trading volume of about 1.2 million shares a day. On Thursday Extreme Networks lowered its forecast for the fiscal third quarter, announcing that it now expects to report a loss of 7 cents to 9 cents and revenue of $118 million to $120 million for the fiscal third quarter. The company previously expected to report earnings in the range of a loss of 3 cents to a profit of 2 cents a share and revenue of $130 million to $140 million for the fiscal third quarter. Analysts now expect Extreme Networks to report a loss of 3 cents a share and revenue of $118.7 million for the fiscal third quarter. TheStreet Ratings team rates EXTREME NETWORKS INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation: "We rate EXTREME NETWORKS INC (EXTR) a SELL. This is driven by several 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 disappointing return on equity and generally disappointing historical performance in the stock itself." Highlights from the analysis by TheStreet Ratings Team goes 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 Communications Equipment industry and the overall market, EXTREME NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500. EXTR'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 45.46%, 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. EXTR, with its decline in revenue, slightly underperformed the industry average of 0.1%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share. The gross profit margin for EXTREME NETWORKS INC is rather high; currently it is at 56.42%. Regardless of EXTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EXTR's net profit margin of -8.90% significantly underperformed when compared to the industry average. EXTR's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems. You can view the full analysis from the report here: EXTR Ratings Report Must Read: Warren Buffett's Top 25 Stocks for 2015

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