Editor's Note: 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. NEW YORK ( TheStreet) -- GameStop (NYSE: GME) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Net operating cash flow has significantly increased by 87.55% to -$11.60 million when compared to the same quarter last year. In addition, GAMESTOP CORP has also vastly surpassed the industry average cash flow growth rate of -21.46%.
- GME 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.15 is very weak and demonstrates a lack of ability to pay short-term obligations.
- GAMESTOP CORP's earnings per share declined by 27.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, GAMESTOP CORP reported lower earnings of $2.44 versus $2.66 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.44).
- GME, with its decline in revenue, underperformed when compared the industry average of 12.8%. Since the same quarter one year prior, revenues fell by 11.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff