DTS Inc. Stock Upgraded (DTSI)

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) -- DTS (Nasdaq: DTSI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.9%. Since the same quarter one year prior, revenues rose by 21.7%. 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's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.94, which clearly demonstrates the ability to cover short-term cash needs.
  • DTS 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DTS INC swung to a loss, reporting -$0.86 versus $1.05 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus -$0.86).
  • The gross profit margin for DTS INC is rather low; currently it is at 16.10%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -4.68% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $1.29 million or 81.09% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
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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. DTS has a market cap of $384.6 million and is part of the technology sector and computer software & services industry. Shares are up 26.1% year to date as of the close of trading on Wednesday.

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

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.

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