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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link

.

NEW YORK (

TheStreet

)

-- RealNetworks

(Nasdaq:

RNWK

) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

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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 Internet Software & Services industry. The net income has significantly decreased by 122.8% when compared to the same quarter one year ago, falling from $81.00 million to -$18.47 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, REALNETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$6.15 million or 2991.45% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of REALNETWORKS INC has not done very well: it is down 7.89% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • REALNETWORKS 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 not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, REALNETWORKS INC turned its bottom line around by earning $1.29 versus -$0.79 in the prior year.

RealNetworks, Inc. provides network-delivered digital media applications and services to manage, play, and share digital media in the United States, Europe, and internationally. RealNetworks has a market cap of $260.7 million and is part of the technology sector and computer software & services industry. Shares are down 2.6% year to date as of the close of trading on Friday.

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RealNetworks Ratings Report

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.