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 (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow.
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Highlights from the ratings report include:
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 36.40% is the gross profit margin for CEC ENTERTAINMENT INC which we consider to be strong. Regardless of CEC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CEC's net profit margin of -0.33% significantly underperformed when compared to the industry average.
- 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 121.5% when compared to the same quarter one year ago, falling from $2.73 million to -$0.59 million.
- The debt-to-equity ratio is very high at 2.88 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CEC has a quick ratio of 0.55, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
CEC Entertainment, Inc. develops, operates, and franchises family dining and entertainment centers under the Chuck E. Cheese's name in the United States and internationally. The company has a P/E ratio of 13.3, below the S&P 500 P/E ratio of 17.7. CEC Entertainment has a market cap of $592.5 million and is part of the services sector and leisure industry. Shares are down 1.3% year to date as of the close of trading on Monday.
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-- Written by a member of TheStreet Ratings Staff
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