NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally poor debt management and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Hotels, Restaurants & Leisure industry average. The net income increased by 36.1% when compared to the same quarter one year prior, rising from $4.78 million to $6.50 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CEC ENTERTAINMENT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CEC ENTERTAINMENT INC reported lower earnings of $2.49 versus $2.66 in the prior year. This year, the market expects an improvement in earnings ($2.80 versus $2.49).
- In its most recent trading session, CEC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The debt-to-equity ratio is very high at 2.37 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.37, which clearly demonstrates the inability to cover short-term cash needs.
CEC Entertainment, Inc., together with its subsidiaries, develops, operates, and franchises family dining and entertainment centers under the name 'Chuck E. Cheese's' in the United States and internationally. The company has a P/E ratio of 10.7, below the average leisure industry P/E ratio of 10.8 and below the S&P 500 P/E ratio of 17.7. CEC Entertainment has a market cap of $589.4 million and is part of the
industry. Shares are down 21.7% year to date as of the close of trading on Thursday.
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