NEW YORK (

TheStreet

)

-- Electronic Arts

(Nasdaq:

ERTS

) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:

  • 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 292.7% when compared to the same quarter one year ago, falling from -$82.00 million to -$322.00 million.
  • In its most recent trading session, ERTS 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • ELECTRONIC ARTS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ELECTRONIC ARTS INC continued to lose money by earning -$2.09 versus -$3.40 in the prior year. This year, the market expects an improvement in earnings ($0.67 versus -$2.09).
  • Net operating cash flow has significantly increased by 57.91% to $349.00 million when compared to the same quarter last year. In addition, ELECTRONIC ARTS INC has also vastly surpassed the industry average cash flow growth rate of -14.17%.
  • ERTS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.

Electronic Arts Inc. develops, markets, publishes, and distributes video game software and content. The company's games include a range of categories, including action-adventure, casual, sports, family, fantasy, racing, music, massively-multiplayer online role-playing, simulation, and strategy. Electronic Arts has a market cap of $6.8 billion and is part of the

TheStreet Recommends

technology

sector and

computer software & services

industry. Shares are up 22% year to date as of the close of trading on Monday.

You can view the full

Electronic Arts Ratings Report

or get investment ideas from our

investment research center

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