Why Green Dot Corp. (GDOT) Is Down Today

NEW YORK (TheStreet) -- Green Dot Corp.  (GDOT) was falling 15.71% to $22.53 after the prepaid debit card provider reported that its fourth-quarter profits plummeted 90% thanks to higher expenses.

The company noted its fourth-quarter profit totaled $876,000, or 2 cents per share, down from $8.71 million, or 24 cents a share, in the same period one year earlier. Excluding items, Green Dot earned 18 cents a share, down from 31 cents a share one year earlier. Operating expenses rose 16% to $141.9 million. Operating revenue rose 3.7% to $142.3 million, while adjusted revenue was $144.9 million. Analysts expected earnings of 21 cents and revenue of $142.7 million.

Green Dot also reported guidance for the full year at a range of $1.22 to $1.28 a share on an adjusted operating revenue of $640 million to $650 million. Analysts polled by Thomson Reuters expected EPS of $1.43 and a revenue of $631.6 million.

TheStreet Ratings team rates GREEN DOT CORP as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate GREEN DOT CORP (GDOT) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • GDOT's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 2.9%. 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.
  • GDOT 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.50, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for GREEN DOT CORP is rather high; currently it is at 65.09%. Regardless of GDOT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GDOT's net profit margin of 4.47% is significantly lower than the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Consumer Finance industry and the overall market, GREEN DOT CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to $5.87 million or 78.06% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: GDOT Ratings Report

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