On Wednesday, the digital entertainment company recovered from Tuesday's decline when the stock fell 12%.
Tuesday's decline resulted from a federal appeals court upholding the non-infringement ruling in a lawsuit brought against Amazon (AMZN - Get Report).
Analysts at Brean feel Tuesday's sell off was baseless and do not feel the federal court ruling will have a negative effect on the company.
TheStreet Ratings team rates ROVI CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ROVI CORP (ROVI) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ROVI's revenue growth has slightly outpaced the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 14.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ROVI CORP 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ROVI CORP turned its bottom line around by earning $0.20 versus -$0.19 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $0.20).
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- Net operating cash flow has declined marginally to $70.47 million or 0.99% when compared to the same quarter last year. Despite a decrease in cash flow of 0.99%, ROVI CORP is in line with the industry average cash flow growth rate of -5.52%.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 2940.2% when compared to the same quarter one year ago, falling from $2.14 million to -$60.81 million.
- You can view the full analysis from the report here: ROVI Ratings Report