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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 31.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- GA 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. To add to this, GA has a quick ratio of 1.60, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 Software industry average. The net income increased by 15.9% when compared to the same quarter one year prior, going from $40.02 million to $46.39 million.
- GA's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 39.90%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
Giant Interactive Group Inc. develops and operates online games in the People's Republic of China. It primarily offers multiplayer online role playing games (MMORPGs). The company operates 11 games, including nine MMORPGs, one casual massively multiplayer online game, and one strategy browser game. The company has a P/E ratio of 7.4, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Giant Interactive Group has a market cap of $1.04 billion and is part of the
industry. Shares are up 7.8% year to date as of the close of trading on Monday.
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-- Written by a member of TheStreet Ratings Staff
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.