DTS Inc. Stock Downgraded (DTSI)

NEW YORK ( TheStreet) -- DTS (Nasdaq: DTSI) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, premium valuation and poor profit margins.

Highlights from the ratings report include:
  • DTSI's revenue growth has slightly outpaced the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 0.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • DTSI 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 this, the company maintains a quick ratio of 12.69, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market on the basis of return on equity, DTS INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Looking at the price performance of DTSI's shares over the past 12 months, there is not much good news to report: the stock is down 32.86%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, DTSI is still more expensive than most of the other companies in its industry.

DTS, Inc. provides audio technologies that are incorporated into various consumer electronics devices worldwide. Its audio technologies enable the delivery and playback of clear and compelling high-definition audio. The company has a P/E ratio of 29.6, equal to the average computer software & services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. DTS has a market cap of $468.3 million and is part of the technology sector and computer software & services industry. Shares are up 1.2% year to date as of the close of trading on Tuesday.

You can view the full DTS Ratings Report or get investment ideas from our investment research center.

-- 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.
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