BlackBerry shares have declined more than 32% in the last six months even as CEO John Chen strives to revive the company’s fortunes. BBM witnessed its strongest growth in July. The Canadian company is teaming up with telecom operators and coming up with new handsets. But BlackBerry still performs poorly on almost every parameter of financial health except valuations, said Jefferson Research in its latest report.

BlackBerry Ltd Earnings Quality, Operating Efficiency Deteriorates

BlackBerry gets a ‘Sell’ rating from Jefferson

The research firm has assigned BlackBerry an overall Sell rating due to weakening operating efficiency and earnings quality. Current valuations of the Waterloo-based company’s stock suggest a lower amount of risk. However, its earnings quality decreased from “strongest” to “weak,” notes Jefferson Research. Corporations sometimes include certain items that boost their reported earnings even though the cash flow supporting the earnings is weak.

Jefferson Research adjusts for such anomalies to produce a more accurate earnings figure. Analysts found that the reported net income shot up from $28 million to $68 million in the first quarter, but the quality of that reported income declined. BlackBerry’s operating cash flow also plunged during the first quarter from $210 million to $134 million.

However, the Canadian company’s cash flow quality improved from “weakest” to “weak.” Its annual operating cash flow quality more than offset the decline in the quarterly operating cash flow quality with a reported number of $134 million and an adjusted figure that was 195% of reported, said Jefferson Research.

BlackBerry’s quick ratio improves

BlackBerry’s operating efficiency went from “strong” to “weakest” due to deterioration of return on SGA costs, equity turnover, and incremental investment capital. What’s more, points out Jefferson Research, the equity turnover declined from 0.8x to 0.7x. The decline suggests that BlackBerry is now generating less revenues per dollar of equity.

The company’s quick ratio improved from 2.7x to 3.3x, which in turn strengthened its balance sheet quality from “weakest” to “weak.” A higher quick ratio suggests BlackBerry has increased the amount of liquid assets relative to its liabilities. BlackBerry’s current ratio also improved from 3.1x to 3.7x.

BlackBerry shares rose 0.68% to $7.42 at 11:03 AM EDT on Monday.