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Trade-Ideas: Electronic Arts (EA) Is Today's Post-Market Laggard Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Electronic Arts (EA) as a post-market laggard candidate. In addition to specific proprietary factors, Trade-Ideas identified Electronic Arts as such a stock due to the following factors:

  • EA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $90.9 million.
  • EA is down 2.2% today from today's close.

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More details on EA:

Electronic Arts Inc. develops, markets, publishes, and distributes game software content and services for video game consoles, personal computers, mobile phones, tablets and electronic readers, and the Internet. EA has a PE ratio of 68.1. Currently there are 12 analysts that rate Electronic Arts a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Electronic Arts has been 3.7 million shares per day over the past 30 days. Electronic Arts has a market cap of $8.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.87 and a short float of 7.1% with 4.95 days to cover. Shares are up 82.9% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Electronic Arts as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • ELECTRONIC ARTS INC has improved earnings per share by 12.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ELECTRONIC ARTS INC increased its bottom line by earning $0.32 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.23 versus $0.32).
  • EA's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for ELECTRONIC ARTS INC is currently very high, coming in at 85.88%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 23.39% trails the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 107.53% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • EA, with its decline in revenue, slightly underperformed the industry average of 5.9%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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