First Albany Cuts FileNet to 'Neutral'

Analyst Mark Murphy says the downgrade is based primarily on valuation

First Albany downgraded FileNet (FILE ) to neutral from buy.

Analyst Mark Murphy says he's downgrading FileNet primarily on valuation, as the stock is nearing peak historical valuation levels on an enterprise-value-to-sales basis, currently trades at 55 times his 52 cents 2004 EPS estimate. He continues to sense that the company is addressing a healthy large deal pipeline, but is cautious on prospects for margin expansion to occur at a fast enough pace to support a materially higher valuation for the stock.

Murphy adds that, while the company's deferred revenue didn't grow year-over-year in the fourth quarter, he still thinks its installed base will grow over time, and the company has a favorable long-term position within the enterprise content management market.

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