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) -- Digital Generation (Nasdaq: DGIT) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.
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- DIGITAL GENERATION 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 year. We anticipate that this should continue in the coming year. During the past fiscal year, DIGITAL GENERATION INC reported lower earnings of $0.96 versus $1.62 in the prior year. For the next year, the market is expecting a contraction of 904.2% in earnings (-$7.72 versus $0.96).
- 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 7661.5% when compared to the same quarter one year ago, falling from -$2.83 million to -$219.73 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 Media industry and the overall market, DIGITAL GENERATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 29.66%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 8744.44% compared to the year-earlier 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.
- The gross profit margin for DIGITAL GENERATION INC is rather high; currently it is at 63.00%. Regardless of DGIT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DGIT's net profit margin of -234.20% significantly underperformed when compared to the industry average.
-- Written by a member of TheStreet Ratings Staff