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Dreamworks Animation SKG (DWA) Spotted As Roof Leaker Today

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 Dreamworks Animation SKG ( DWA) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Dreamworks Animation SKG as such a stock due to the following factors:

  • DWA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $53.3 million.
  • DWA has traded 147,570 shares today.
  • DWA is trading at 1.80 times the normal volume for the stock at this time of day.
  • DWA crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in DWA with the Ticky from Trade-Ideas. See the FREE profile for DWA NOW at Trade-Ideas

More details on DWA:

DreamWorks Animation SKG, Inc. engages in the development, production, and exploitation of animated films and associated characters worldwide. The company operates through two reportable segments, Film and TV Specials/Series, and Classic Media. DWA has a PE ratio of 46.2. Currently there is 1 analyst that rates Dreamworks Animation SKG a buy, 3 analysts rate it a sell, and 4 rate it a hold.

The average volume for Dreamworks Animation SKG has been 886,100 shares per day over the past 30 days. Dreamworks Animation SKG has a market cap of $2.3 billion and is part of the services sector and media industry. The stock has a beta of 0.68 and a short float of 19.4% with 4.65 days to cover. Shares are down 15.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dreamworks Animation SKG as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.

Highlights from the ratings report include:

  • DWA's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • DREAMWORKS ANIMATION INC reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DREAMWORKS ANIMATION INC turned its bottom line around by earning $0.65 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.65).
  • DWA, with its decline in revenue, underperformed when compared the industry average of 4.4%. Since the same quarter one year prior, revenues fell by 22.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for DREAMWORKS ANIMATION INC is currently lower than what is desirable, coming in at 31.81%. Regardless of DWA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.41% trails the industry average.
  • Net operating cash flow has significantly decreased to -$43.45 million or 34381.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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