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) -- Scientific Games Corporation (Nasdaq: SGMS) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk.
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- SGMS's share price has surged by 27.51% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Net operating cash flow has slightly increased to $23.24 million or 5.97% when compared to the same quarter last year. Despite an increase in cash flow, SCIENTIFIC GAMES CORP's average is still marginally south of the industry average growth rate of 8.97%.
- 43.20% is the gross profit margin for SCIENTIFIC GAMES CORP which we consider to be strong. Regardless of SGMS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SGMS's net profit margin of -5.98% significantly underperformed when compared to the industry average.
- 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 Hotels, Restaurants & Leisure industry and the overall market, SCIENTIFIC GAMES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 823.1% when compared to the same quarter one year ago, falling from $1.82 million to -$13.15 million.
-- Written by a member of TheStreet Ratings Staff