NEW YORK ( TheStreet) -- Dreamworks Animation SKG (Nasdaq: DWA) has been downgraded by TheStreet Ratings from buy 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 and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income. Highlights from the ratings report include:
- DWA 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.
- 38.90% is the gross profit margin for DREAMWORKS ANIMATION INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.10% is above that of the industry average.
- The revenue fell significantly faster than the industry average of 19.3%. Since the same quarter one year prior, revenues fell by 20.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- DREAMWORKS ANIMATION 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, DREAMWORKS ANIMATION INC reported lower earnings of $1.02 versus $1.97 in the prior year. For the next year, the market is expecting a contraction of 0.5% in earnings ($1.02 versus $1.02).
- 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 Media industry. The net income has significantly decreased by 71.5% when compared to the same quarter one year ago, falling from $85.23 million to $24.28 million.
-- Written by a member of TheStreet Ratings Staff