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) -- Discovery Communications (Nasdaq:DISCA) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- DISCA's revenue growth has slightly outpaced the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 8.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.83, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.57, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DISCOVERY COMMUNICATIONS INC is currently very high, coming in at 91.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.66% is above that of the industry average.
- Compared to its closing price of one year ago, DISCA's share price has jumped by 59.15%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- DISCOVERY COMMUNICATIONS INC's earnings per share declined by 29.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, DISCOVERY COMMUNICATIONS INC reported lower earnings of $2.51 versus $2.82 in the prior year. This year, the market expects an improvement in earnings ($6.84 versus $2.51).
--Written by a member of TheStreet Ratings Staff.Exclusive Offer: Jim Cramer's 'go-to' small/mid-cap guru Bryan Ashenberg only buys stocks he thinks could return 50-100%. See his top picks for 14-days FREE.
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