NEW YORK (TheStreet) -- Shares of DreamWorks Animation Skg Inc. (DWA) are down -3.20% to $26.00 in pre-market trading on Monday after the animated film company was downgraded to "underperform" from "neutral" at Bank of America (BAC) Merrill Lynch.
The firm lowered its rating and cut its estimates for the company due to the weak box office performance of the film "Mr. Peabody & Sherman."
TheStreet Ratings team rates DREAMWORKS ANIMATION INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DREAMWORKS ANIMATION INC (DWA) 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 compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 120.8% when compared to the same quarter one year prior, rising from -$82.71 million to $17.19 million.
- DWA's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- 41.65% is the gross profit margin for DREAMWORKS ANIMATION INC which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.41% trails the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Media industry and the overall market, DREAMWORKS ANIMATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$43.45 million or 34381.74% 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: DWA Ratings Report