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Shanda Games Limited Stock Upgraded (GAME)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Shanda Games (Nasdaq:GAME) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • 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, SHANDA GAMES LTD -ADR's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • GAME's debt-to-equity ratio of 0.81 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. Despite the fact that GAME's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.61 is high and demonstrates strong liquidity.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Software industry average. The net income has decreased by 24.5% when compared to the same quarter one year ago, dropping from $55.00 million to $41.50 million.
  • Net operating cash flow has decreased to $34.68 million or 45.81% 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.
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Shanda Games Limited, an online game company, develops, sources, and operates online games in the People's Republic of China. It also licenses its games to third parties. The company has a P/E ratio of 9.1, below the S&P 500 P/E ratio of 17.7. Shanda Games has a market cap of $896.3 million and is part of the technology sector and computer software & services industry. Shares are down 18.2% year to date as of the close of trading on Wednesday.

You can view the full Shanda Games Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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